Using the Binomial Model, find the value of a firm’s levered equity (E
Using the Binomial Model, find the value of a firm’s levered equity (EL) given the following values: V=100, u=1.3, d=1/u, p=0.7, rf=5%, X=100, and T=3.
EL
a. 32.34
b. 27.34
c. 23.96
d. 18.96
FORMULAS: ; EL = ;
ANSWER
D
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