In order to stay within the Merton model framework, one way to accommodate firms with multiple debt issues in their capital structures is to collapse all debt into zerocoupon form at some representative maturity (e.g., one year). For example, one approach is to treat the debt face value at maturity of one year as being equal to the sum of all short-term debt plus one-half of long-term debt. The reason for taking only half of long-term debt is: 

(a) Long-term debt is less valuable than short-term debt because its present value is less. 

(b) Long-term debt has a maturity greater than one year. 

(c) It is possible to take steps in time to avoid bankruptcy in the long run. 

(d) Only the coupons on long-term debt are due at the end of one year.