Shire PLC has a zero-coupon bond issue outstanding with a £12 billion face value that matures in five years. The current market value of the firm's assets is £20 billion. The standard deviation of the return on the firm's assets is 23% per year, and the annual risk-free rate is 3% per year, compounded continuously. Based on the Black-Scholes model, what is the market value of the firm’s equity and debt?

Answer rating: 100% (QA)

Answer Given Information Value of the underlying asset Ao Value of the firm 20 bill... View the full answer