Question: 8. Equity as an Option Sunburn Sunscreen has a zero coupon bond issue outstanding with a $15,000 face value that matures in one year. The

8. Equity as an Option 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 $16,100. The standard deviation of the return on the firm's assets is 32 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
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
