ABC Ltd., has a total market value of Rs.18 million. The debt of the company, which...

ABC Ltd., has a total market value of Rs.18 million. The debt of the company, which is composed of pure discount bonds, has a face value of Rs.8 million with a maturity of 5 years. The company’s standard deviation of return is 0.50 and the risk free rate of return is 10 percent.

Required;

Using the Black-scholes option valuation model, determine the market value of ABC ‘s equity capital.
Market price of equity per share if share outstanding are 800,000 shares.
What is the current market value of company’s debt.
Compute the interest rate on bonds (yield to maturity)

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