# Childs Manufacturing has a discount bank loan that matures in one year and requires the firm to pay $2,950. Th

## Question:

Childs Manufacturing has a discount bank loan that matures in one year and requires the firm to pay $2,950. Th e current market value of the firm’s assets is $3,400. The annual variance for the firm’s return on assets is 0.29, and the annual risk-free interest rate is 4.5 percent. Based on the Black–Scholes model, what is the market value of the firm’s debt and equity?

Round computed values for d_{1} and d_{2} to the nearest values in Table 25A.1 for determining N(d1) and N(d2), respectively.

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**Related Book For**

## Fundamentals of Corporate Finance

**ISBN:** 978-0071051606

8th Canadian Edition

**Authors:** Stephen A. Ross, Randolph W. Westerfield

**Question Details**

Chapter #

**25**Section: Appendix A

Problem: 2

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