hi,
according to chapter12 page 24,
if we use those 2 simultaneous equations and
know the value of equity at time 0 (Eo) and standard derivation of equity price, then we can determine the value of the company asset at time 0 (Vo) and the standard derivation of the value of company asset.
I can't find any related example about it, so I hope you can give me some idea about how to solve Vo and the standard derivaton of V0
Suppose Eo is 3 millian, the standard derivation of Eo is 80%, the value of debt to be repaid in 1 year time is 10 millian, riskfree rate is 5%,
what is Vo and its standard derivation?
I have no idea about how to find them....because I solve eliminate "alpha d2"
I would be much appeciated if you could write down few steps for me
I put those 2 equations below here
Last edited by a moderator: Aug 14, 2009