1 consider an mampm world with no taxes when a firm is 30, Ask an Expert

Finance

1. Consider an M&M world with no taxes. When a firm is 30% debt financed, its cost of debt is 6% and cost of equity is 12%. When the firm increases debt to 50%, assuming that debt still costs 6%, what is the cost of equity?

2. The current price of a non-dividend paying asset is $65, the riskless interest rate is 5% p.a. continuously compounded, and the option maturity is five years. What is the lower boundary for the value of a European vanilla put option on this asset with strike price of $80?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92691454

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