What is the initial value of? gladstone debt

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Gladstone Corporation is about to launch a new product. Depending on the success of the new? product, Gladstone may have one of four values next? year: $153 ?million, $131 ?million, $95 ?million, and $80 million. These outcomes are all equally? likely, and this risk is diversifiable. Gladstone will not make any payouts to investors during the year. Suppose the? risk-free interest rate is 5.2% and assume perfect capital markets.

a. What is the initial value of? Gladstone's equity without? leverage? Now suppose Gladstone has? zero-coupon debt with a $100 million face value due next year.

b. What is the initial value of? Gladstone's debt?

c. What is the? yield-to-maturity of the? debt? What is its expected? return?

Reference no: EM132623561

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