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    Current market value of the firm's debt

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    In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures from historical book values to market values. KJM Corporation's balance sheet (book values) as of today is as follows:

    Long-term debt (bonds, at par) $23,500,000
    Preferred stock 2,000,000
    Common stock ($10 par) 10,000,000
    Retained earnings 4,000,000
    Total debt and equity $39,500,000

    The bonds have a 7.7% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 11%, so the bonds now sell below par. What is the current market value of the firm's debt?
    $17,734,265
    $23,394,137
    $18,866,239
    $16,602,290
    $19,054,902

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    https://brainmass.com/business/bond-valuation/current-market-value-of-the-firm-s-debt-307748

    Solution Preview

    The current price of the bonds is the present value of the interest and principal discounted at the yield to ...

    Solution Summary

    The solution explains how to calculate the current market value of the firm's debt

    $2.19

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