Abstract
The Grand Trunk was the largest of Canada′s early railways, a technological achievement, but a financial failure. By studying its financial records, we explore how the Company, through debt reorganizations, stayed afloat despite being close to bankruptcy during much of its first 30 years. We also analyze Grand Trunk securities with the help of an options pricing model, concluding that investors, who were mainly in Britain, accurately assessed the value of the Company. Included in their calculation was the possibility that raised the price of the firm′s debt and allowed the Company to successfully float new debenture issues.
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