Sunburn Sunscreen has a zero coupon bond issue outstanding with a face value of $12,000 that matures

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Sunburn Sunscreen has a zero coupon bond issue outstanding with a face value of $12,000 that matures in one year. The current market value of the firm’s assets is $13,800. The standard deviation of the return on the firm’s assets is 32 percent per year, and the annual risk-free rate is 6 percent per year, compounded continuously. Based on the Black-Scholes model, what is the market value of the firm’s equity and debt?

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Corporate Finance Core Principles And Applications

ISBN: 9781260571127

6th Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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