{"id":118301,"date":"2018-02-20T23:50:30","date_gmt":"2018-02-20T23:50:30","guid":{"rendered":"https:\/\/writemyessayfree.com\/finance-week-7"},"modified":"2017-08-12T06:55:41","modified_gmt":"2017-08-12T06:55:41","slug":"finance-week-7","status":"publish","type":"post","link":"https:\/\/www.benedictsol.com\/blogs\/finance-week-7\/","title":{"rendered":"finance week 7"},"content":{"rendered":"<p>Your boss now wants you to help&nbsp;Higgs&nbsp;Bassoon Corporation.&nbsp;Higgs&nbsp;Bassoon Corporation is a custom manufacturer of bassoons and other wind instruments. Its current value of operations, which is also its value of debt plus equity, is estimated to be $200 million.&nbsp;Higgs&nbsp;has zero coupon debt outstanding that matures in 3 years with $110 million face value. The risk-free rate is 5%, and the standard deviation of returns for similar companies is 60%. The owners of&nbsp;Higgs&nbsp;Bassoon view their equity investment as an option and would like to know its value. Start with the attached&nbsp;partial model, and answer the following questions:<\/p>\n<ul>\n<li>Using the Black-Scholes&nbsp;option pricing model, how much is the equity worth?<\/li>\n<li>How much is the debt worth today? What is its yield?<\/li>\n<li>How would the equity value change if the company used risk management techniques to reduce its volatility to 45%? Can you explain this?<\/li>\n<li>Graph the cost of debt versus the face value of debt for values of the face value from $10 to $160 million.<\/li>\n<li>Graph the values of debt and equity for volatilities from 0.10 to 0.90 when the face value of the debt is $100 million.<\/li>\n<\/ul>\n<p>Scoring Rubric &#8211;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Your boss now wants you to help&nbsp;Higgs&nbsp;Bassoon Corporation.&nbsp;Higgs&nbsp;Bassoon Corporation is a custom manufacturer of bassoons and other wind instruments. Its current value of operations, which is also its value of debt plus equity, is estimated to be $200 million.&nbsp;Higgs&nbsp;has zero <a href=\"https:\/\/www.benedictsol.com\/blogs\/finance-week-7\/\" class=\"read-more\">Read More &#8230;<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-118301","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/118301","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=118301"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/118301\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=118301"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=118301"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=118301"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}