Question: Equity as an Option. Sunburn Sunscreen has a zero coupon bond issue outstanding with a $ 1 0 , 0 0 0 face value that

Equity as an Option. Sunburn Sunscreen has a zero coupon bond issue outstanding with a $10,000 face value that matures in one year. The current market value of the firm's assets is $10,900. The standard deviation of the return on the firm's assets is 31 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? Solve using Excel.

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