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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?

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

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