CORPORATEFINANCE-SOLUTIONTOTHEFINALEXAM(英文版)(pdf7页)分析.pdf

Bergals School of Economics Spring 1998/9 Tel Aviv University CORPORATE FINANCE - SOLUTION TO THE FINAL EXAM Yossi Spiegel Problem 1 (a) When the firm is all-equity, its market value is given by: (1) Using this expression, (2) (b) Given that debt is safe, the market value of the consol bonds is given by (3) Given ρL and the fact that rD goes to bondholders, the market value of the firm’s equity is: (4) Noting that the expression in the second line is similar to that in equation (1) (except that ρL replaces ρ) and the expression in the third line is similar to the that in equation (2) (except that ρL replaces r and D is multiplied by 1-tc), it follows that 2 (5) Combining the values of debt and equity, (6) (c) If an investor holds a fraction α of the equity of an all-equity firm he obtains a per-period payoff of (7) If an investor holds a fraction α of a leveraged firm’s equity, and a fraction β of the leveraged firm’s debt, his per-period payoff is: