Digital Organics has 10 million outstanding shares trading at $25 per share. It also has a large amount of debt outstanding, all coming due in one year. The debt pays interest at 8 percent. It has a par (face) value of $350 million, but is trading at a market value of only $280 million. The one-year risk-free interest rate is 6 percent.

(a) Write out the put–call parity formula for Digital Organics’ stock, debt, and assets.

(b) What is the value of the default put given up by Digital Organics’ creditors?