Please show all work written out! Boeing owns assets that have an 80% probability...
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Please show all work written out!
Boeing owns assets that have an 80% probability of having a market value of $900M and a 20% probability that the assets will be worth $100M in one year. The firm will not generate cash flows thereafter. The current risk-free rate is 3%. Suppose Boeing has outstanding debt that has a market value today of $200M and is due in one year. The cost of debt is 4.5% and the unlevered cost of equity is 8%. The capital market is perfect, what is the face value (the promised payment) of Boeing's debt? Boeing owns assets that have an 80% probability of having a market value of $900M and a 20% probability that the assets will be worth $100M in one year. The firm will not generate cash flows thereafter. The current risk-free rate is 3%. Suppose Boeing has outstanding debt that has a market value today of $200M and is due in one year. The cost of debt is 4.5% and the unlevered cost of equity is 8%. The capital market is perfect, what is the face value (the promised payment) of Boeing's debt
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