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Do No Harm $/3$

$11.$ Equity as an option

Burleigh Co$.$ is a manufacturing firm. Burleigh Co$.\text{'}$s current value of operations, including debt and equity, is estimated to be $$20$ million. Burleigh has $$8$ million face$-$value zero coupon debt that is due in three years. The risk$-$free rate is $6\%,$ and the volatility of companies similar to Burleigh Co $60\%.$ Burleigh Co$.\text{'}$s performance has not been very good as compared to previous years. Because the company has debt, it will repay its loan, but $t$ company has the option of not paying equity holders. The ability to make the decision of whether to pay or not looks very much like an option.

Based on your understanding of the Black$-$Scholes option pricing model $($OPM$),$ calculate the following values and complete the table. $($Note: Use $2\mathrm{.}7183$ as the approximate value of e in your calculations. Also, do not round intermediate calculations. Round your answers to two decimal places.$)$

Burleigh Co$.$ Value $($Millions of dollars$)$

Equity value

Debt value

bt yield