How much is the debt worth today? What is its yield?
- Using the Black-Scholes option pricing model, how much is the equity worth?
- How much is the debt worth today? What is its yield?
- How would the equity value change if the company used risk management techniques to reduce its volatility to 45%? Can you explain this?
- Graph the cost of debt versus the face value of debt for values of the face value from $10 to $160 million.
- 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.
Scoring Rubric –
| Levels of Achievement | ||||
|---|---|---|---|---|
| Criteria | Exemplary | Accomplished | Developing | Beginning |
|
Excel File
 Weight 50.00%
|
100 %
Models were estimated with great accuracy, using Excel and provided relevant outputs in an excel file |
85 %
Models were estimated with moderate accuracy, using Excel and provided relevant outputs in an excel file |
75 %
Models were estimated with inaccuracy, using Excel and provided relevant outputs in an excel file |
50 %
Model estimations are mostly incorrect, or no model was provided |
|
Interpretation
Weight 50.00%
|
100 %
Interpretations are provided with great accuracy by addressing all the required questions, and minimum words requirement is met |
85 %
Interpretations are provided with moderate accuracy by addressing most of all required questions, and minimum words requirement is met |
75 %
Interpretations are provided with many errors, and, some of important questions were not answered. Minimum words requirement is not met. |
50 %
Interpretations are mostly incorrect, or no interpretation was provided. |
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