The assets of Raceway Downs are currently valued at $789,000. The assets are expected to be worth

Question:

The assets of Raceway Downs are currently valued at $789,000. The assets are expected to be worth either $770,000 or $830,000 one year from now. The company has a pure discount loan outstanding that matures in one year. The of the loan is $800,000. The risk-free rate of return is 5 percent and the inflation rate is 3.5 percent. What is the value of the equity in this firm?
a. $27,833
b. $31,407
c. $35,920
d. $37,548

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...