The yield-to-maturity of gladstones debt

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Reference no: EM131947179

Gladstone is about to launch a new product. depedning on the success of the new product, gladstone may have one of four values next year: $155 million, $130 million, $97 million, or $82 million. these outcomes are equally likely and the risk is diversifiable. gladstone will not make any payouts to investors during the year. suppose the risk-free interest rate is 5.2% and assume perfect capital markets.

a) the initial value of gladstones equity without leverage is $______ million.

b) now suppose gladstone has zero-coupon debt with $100 million face value due next year. the initial value of gladstones debt is $_______

c) the yield-to-maturity of gladstones debt is $_______

d) the initial value of gladstones equity is $_______

e) gladstones total value with leverage is $________

Reference no: EM131947179

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