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 d₁ and d₂ to the nearest values in Table 25A.1 for determining N(d1) and N(d2), respectively.