Question: Sunburn Sunscreen has a zero coupon bond issue outstanding with a $ 1 0 , 0 0 0 face value that matures in one year.
Sunburn Sunscreen has a zero coupon bond issue outstanding with a $ face value that matures in one year. The current market value of the firms assets is $ The standard deviation of the return on the firms assets is percent per year, and the annual riskfree rate is percent per year, compounded continuously. The firm is considering two mutually exclusive investments. Project A has an NPV of $ and Project B has an NPV of $ As the result of taking Project A the standard deviation of the return on the firms assets will increase to percent per year. If Project B is taken, the standard deviation will fall to percent per year.
a What is the value of the firms equity and debt if Project A is undertaken?
Note: Do not round intermediate calculations and round your answers to decimal places, eg
a What is the value of the firms equity and debt if Project B is undertaken?
Note: Do not round intermediate calculations and round your answers to decimal places, eg
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