25 Equity as an Option Shire plc has a zero coupon bond issue outstanding with £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 cent per year, and the annual risk-free rate is 3 per cent per year, compounded continuously. Based on the Black–Scholes model, what is the market value of the firm’s equity and debt?