Digital organics has 111 million outstanding shares trading, Ask an Expert

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Digital Organics has 11.1 million outstanding shares trading at $36 per share. It also has a large amount of debt outstanding, all coming due in one year. The debt pays interest at 9%. It has a par (face) value of $339 million, but is trading at a market value of only $291 million. The one-year risk-free interest rate is 7%.

a. Complete the put–call parity formula for Digital Organics’ stock, debt, and assets. (Enter your answers in millions. Round your answers to 1 decimal place.) Value of call + = Value of put + + PV(Debt, at risk-free rate) = + Assets $ + $ = $ + $

b. What is the value of the company’s option to default on its debt? (Enter your answer in millions.) Value of default put $

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91787807

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