Question: A company has a zero coupon bond issue with a face value of $2 million that matures in one year. The assets of the firm

A company has a zero coupon bond issue with a face value of $2 million that matures in one year. The assets of the firm are currently valued at $3.2 million, but this amount is expected to either decrease to $2.5 million or increase to $3.8 million in a year's time. Assume the risk-free rate is 7%. What is the value of the equity?

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