Suppose that Backwoods Chemical's book balance sheet is: Backwoods Chemical Company (Book Values) Debit Net working capital Net fixed assets $ 400 1,600 $ 1,000 1,000 Credit Debt Total assets $ 2,000 $ 2,000 Equity (net worth) Total value The debt has a one-year maturity and a promised interest payment of 9%. Thus, the promised payment to Backwoods's creditors is $1,090. The market value of the assets is $1,200, and the standard deviation of asset value is 45% per year. The risk-free interest rate is 9%. Calculate the value of Backwoods's debt and equity. Note: Do not round intermediate calculations. Round your answers to the nearest whole number. Value of equity Value of debt
Suppose that Backwoods Chemical's book balance sheet is: Backwoods Chemical Company (Book Values) Debit Net working capital Net fixed assets $ 400 1,600 $ 1,000 1,000 Credit Debt Total assets $ 2,000 $ 2,000 Equity (net worth) Total value The debt has a one-year maturity and a promised interest payment of 9%. Thus, the promised payment to Backwoods's creditors is $1,090. The market value of the assets is $1,200, and the standard deviation of asset value is 45% per year. The risk-free interest rate is 9%. Calculate the value of Backwoods's debt and equity. Note: Do not round intermediate calculations. Round your answers to the nearest whole number. Value of equity Value of debt
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter11: Determining The Cost Of Capital
Section: Chapter Questions
Problem 16P
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