Acort Industries owns assets that will have? a(n) 65 %probability of having a market value of $ 43 million in one year.There is a 35 % chance that the assets will be worth only $ 13million. The current? risk-free rate is 10 %?, and? Acort's assetshave a cost of capital of 20 %.
a. If Acort is? unlevered, what is the current market value ofits? equity?
b. Suppose instead that Acort has debt with a face value of $ 11million due in one year. According to? MM, what is the value of?Acort's equity in this? case?
c. What is the expected return of? Acort's equity without?leverage? What is the expected return of? Acort's equity with?leverage?
d. What is the lowest possible realized return of? Acort'sequity with and without? leverage?
a. If Acort is? unlevered, what is the current market value ofits? equity?
The current market value of the unlevered equity is ?$million.
