Question: Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The value of the companys assets

Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The value of the companys assets is currently $1,200. Urban Meyer, the CEO, believes that the assets in the company will be worth either $950 or $1,470 in a year. The going rate on one-year T-bills is 2 percent.

a-1.

What is the value of the companys equity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

a-2.

What is the value of the debt? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Suppose the company can reconfigure its existing assets in such a way that the value in a year will be $910 or $1,710.

b.	If the current value of the assets is unchanged, what is the new value of the company's equity?

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