Calculate the interest rate on the debt

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Reference no: EM132067472

Rackin Pinion Corporation's assets are currently worth $1,160. In one year, they will be worth either $1,120 or $1,410. The risk-free interest rate is 3 percent. Suppose the company has an outstanding debt issue with a face value of $1,000.

a. What is the value of the equity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Equity value $

b-1 What is the value of the debt? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Debt value $

b-2 What is the interest rate on the debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to the nearest whole number, e.g., 32.)

Interest rate %

PLEASE FOLLOW INSTRUCTIONS ON ROUNDING DECIMALS PLEASE!

Reference no: EM132067472

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