North Technology Inc. has a zero-coupon bond that matures in five years with a face value...

North Technology Inc. has a zero-coupon bond that matures in five years with a face value of $60,000. The current value of the company’s asset is $57,000 and the standard deviation of rate of return on assets is 50% per year. The continuously compounded risk-free rate of interest is 6%. What are the market values of the company’s debt and equity? What is the yield to maturity on North Technology’s debt? What is the value of shareholders’ limited liability? Suppose the company can re-structure its balance sheet so that the standard deviation of its return on assets increases to 60% per year. Assuming all other things remaining the same, who (shareholders vs. bondholders) benefits from the restructuring and why? What are the magnitudes of loss/gain to each type of stakeholders? Show your calculations.

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North Technology Inc. has a zero-coupon bond that matures in five years with a face value...

North Technology Inc. has a zero-coupon bond that matures in five years with a face value of $60,000. The current value of the company’s asset is $57,000 and the standard deviation of rate of return on assets is 50% per year. The continuously compounded risk-free rate of interest is 6%. What are the market values of the company’s debt and equity? What is the yield to maturity on North Technology’s debt? What is the value of shareholders’ limited liability? Suppose...

North Technology Inc. has a zero-coupon bond that matures in five years with a face value...

North Technology Inc. has a zero-coupon bond that matures in five years with a face value of $60,000. The current value of the company’s asset is $57,000 and the standard deviation of its rate of return on assets is 50% per year. The continuously compounded risk-free rate of interest is 6%. 1. What are the market values of the company’s debt and equity? 2, What is the yield on North Technology’s debt? 3. What is the value of shareholders’ limited...

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Handler Corp. has a zero coupon bond that matures in five years with a face value of $91,000. The current value of the company’s assets is $87,000 and the standard deviation of its return on assets is 38 percent per year. The risk-free rate is 6 percent per year, compounded continuously. a. What is the value of a risk-free bond with the same face value and maturity as the current bond? (Do not round intermediate calculations and round your...

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North Technology Inc. has a zero-coupon bond that matures in five years with a face value...

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