The current market value of the assets of ABCD is $86.28 million.The call option value on the firm's assets is $53.09 million.What is the market value of the firm's debt?

Question

Quizplus · Accepted Answer

The market value of the firm's equity can be found by subtracting the call option value from the total asset value: $86.28 million - $53.09 million = $33.19 million. Therefore, the market value of the firm's debt must be the difference between the asset value and the equity value: $86.28 million - $33.19 million = $53.09 million. So, the answer is C.

The Current Market Value of the Assets of ABCD Is