3. Acort Industries owns assets that will have an 80% probability of having a market value of $50 million in one year. There is a 20% chance that the assets will be worth only $20 million. The current risk-free rate is 5\%, and Acort's assets have a cost of capital of 10%. Assume perfect capital markets. (a) If Acort is unlevered, what is the current market value of its equity? (b) Suppose instead that Acort has zero-coupon debt with a face value of $20 million due in one year. 1) According to MM, what is the current value of Acort's equity in this case? 2) What is the expected return of Acort's equity without leverage? What is the expected return of Acort's equity with leverage? 3) What is the lowest possible realized return of Acort's equity with and without leverage? (c) Now suppose that Acort has zero-coupon debt with a face value of \$25 million due in one year. With this amount of debt, its debt cost of capital is 6%. 1) What is the initial value of Acort's debt in this case? 2) What is the yield-to-maturity of the debt? Why its yield-to-maturity is higher than cost of debt? 3) What is the initial value of Acort's equity? 4) What is the expected return of Acort's equity in this case