Current market value of the company equity

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Tucal Co. has a single zero-coupon bond outstanding that matures in 10 years with a face value of $15 million. The current value of the company's assets is $13.4 million, and the standard deviation of the return on the firm's assets is 39% per year. The risk-free rate is 6% per year compounded continuously.

-What is the current market value of the company's equity

-What is the current market value of the company's debt

-What is the company's continuously compounded cost of debt

-The company has a new project available. The project has a net present value of $1.2 million. If the company undertakes the new project, what will be the new market value of equity? Assume volatility is unchanged.

-Assuming the company undertakes the new project and does not borrow any additional funds, what is the new continuously compounded cost of debt. Explain what is happening here.

Reference no: EM132711539

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