Question: Question 2 (12 Points) A company has a single zero coupon bond outstanding that matures in five years with a face value of $27 million.

Question 2 (12 Points) A company has a single zero coupon bond outstanding that matures in five years with a face value of $27 million. The current value of the company's assets is $20 million, and the standard deviation of the return on the firm's assets is 43 percent per year. The risk- free rate is 4 percent per year, compounded continuously. a. What is the current market value of the company's equity? (6) b. What is the current market value of the company's debt? (3) c. What is the company's continuously compounded cost of debt? (3)

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