Sunburn Sunscreen has a zero coupon bond issue outstanding with a $10,000 face value that matures in

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Sunburn Sunscreen has a zero coupon bond issue outstanding with a $10,000 face value that matures in one year. The current market value of the firm’s assets is $11,000. The standard deviation of the return on the firm’s assets is 42 percent per year, and the annual risk-free rate is 5 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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Fundamentals Of Corporate Finance

ISBN: 9780072553079

6th Edition

Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan

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