Sunburn Sunscreen has a zero coupon bond issue outstanding with a $25,000 face value that matures in
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Question:
Sunburn Sunscreen has a zero coupon bond issue outstanding with a $25,000 face value that matures in oneyear.The current market value of thefirm'sassets is $26,300. The standard deviation of the return on thefirm'sassets is 38 percent peryear,and the annual risk-free rate is 5 percent peryear,compounded continuously. Based on the Black-Scholes model, what is the market value of thefirm'sequity and debt?
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