Question: Sunburn Sunscreen has a zero coupon bond issue outstanding with
Sunburn Sunscreen has a zero coupon bond issue outstanding with a $15,000 face value that matures in one year. The current market value of the firm’s assets is $15,800. The standard deviation of the return on the firm’s assets is 26 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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