Equity as an Option Frostbite Thermalwear has a zero coupon bond issue outstanding with a face value of $30,000 that matures in one year. The current market value of the firm’s assets is $36,400. The standard deviation of the return on the firm’s assets is 53 percent per year, and the annual risk-free rate is 5 percent per year, compounded continuously. Based on the Black–Scholes model, what is the market value of the firm’s equity and debt? What is the firm’s continuously compounded cost of debt?