FM11 Ch 17 P08 Build a Model

D1 d2 nd1 nd2 call price equity value this is the

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1 d2 N(d1) N(d2) Call Price = Equity Value this is the current value of operations this is sigma--also known as volatility use the formula from the text use the formula from the text use the Normsdist function in the function wizard b. How much is the debt worth today? What is its yield? Debt value = Total Value - Equity Value = Debt yield = c. How much would the equity value and the yield on the debt change if Fethe's management were able to use risk management techniques to reduce its volatility to 30 percent? Can you explain this? Equity value at 50% volatility Equity value at 30% volatility Percent change a. Graph the cost of debt versus the face value of debt for values of the face value from $0.5 to $...
View Full Document

This document was uploaded on 01/19/2014.

Ask a homework question - tutors are online