RWJ 7th Edition Solutions

b. The current value of debt is the value of the firm’s assets minus the value of the equity, so: D0 = $1,050 – 97.62 . D0 = $952.38 . We can use the face value of the debt and the current market value of the debt to find the interest rate, so: Interest rate = [$1,000/$952.38] – 1 . Interest rate = .05 or 5%. c. The value of the equity ... ................
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