In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis.KJM Corporation's balance sheet as of January 1, 2010 is as follows: The bonds have a 4 percent coupon rate, payable semiannually, and a par value of $1,000.They mature on January 1, 2020.The yield to maturity is 12 percent, so the bonds now sell below par.What is the current market value of the firm's debt?
A) $5,412,000
B) $5,480,000
C) $2,531,000
D) $7,706,000
E) $7,056,000

Question

In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis.KJM Corporation's balance sheet as of January 1, 2010 is as follows:  The bonds have a 4 percent coupon rate, payable semiannually, and a par value of $1,000.They mature on January 1, 2020.The yield to maturity is 12 percent, so the bonds now sell below par.What is the current market value of the firm's debt?
A) $5,412,000 
B) $5,480,000 
C) $2,531,000 
D) $7,706,000 
E) $7,056,000

Quizplus · Accepted Answer

The Answer of In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis.KJM Corporation's balance sheet as of January 1, 2010 is as follows:  The bonds have a 4 percent coupon rate, payable semiannually, and a par value of $1,000.They mature on January 1, 2020.The yield to maturity is 12 percent, so the bonds now sell below par.What is the current market value of the firm's debt?
A) $5,412,000 
B) $5,480,000 
C) $2,531,000 
D) $7,706,000 
E) $7,056,000

In Order to Accurately Assess the Capital Structure of a Firm