Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The value of Buckeye's assets is currently $1,300. Jim Tressell, the CEO, believes that the assets in the firm will be worth either $500 or $1,700 in a year. The going rate on one-year T-bills is 6 percent.

a. The value of Buckeye's equity is $________ and the value of the debt is $______.

b. Suppose Buckeye can reconfigure its existing assets in such a way that the value in a year will be $300 or $1,900. If the current value of the assets is unchanged, the value of Buckeye's equity will be $ and the stockholders (will not/will) favor such a move.