Waiting for answer This question has not been answered yet. You can hire a professional tutor to get the answer.

QUESTION

Vista Oil & Gas, S.A.B. de C.V. owns assets that are 80% likely to have a market value of $ 100 million within a year and 20% that they are worth only $ 70 million. The current risk-free interest

Vista Oil & Gas, S.A.B. de C.V. owns assets that are 80% likely to have a market value of $ 100 million within a year and 20% that they are worth only $ 70 million. The current risk-free interest rate is 5% and the assets of this company have a cost of capital of 10%. There are two supposed scenarios:

a) Without debt, what is the current market value of your equity?

b) You have a debt with a nominal value of 70 million dollars maturing within a year, what is the value of your equity? Argue, lean on the MM (Modigliani & Miller)Theory

c) What is the expected return without leverage?

d) What is the lowest possible return on equity with or without leverage? Argue based on the MM Theory

Show more
LEARN MORE EFFECTIVELY AND GET BETTER GRADES!
Ask a Question