5. Equity as an option Aa Aa Baker Corp. is a manufacturing firm. Baker Corp.'s current value of operations, including debt and equity, is estimated to be $500 million. Baker Corp. has $200 million face-value zero coupon debt that is due in three years. The risk-free rate is 5%, and the volatility of companies similar to Baker Corp. is 60%. Baker Corp.'s performance has not been very good as compared to previous years. Because the company has debt, it will repay its loan, but the company has the option of not paying equity holders. The ability to make the decision of whether to pay or not looks very much like an option. Based on your understanding of the Black-Scholes option pricing model (OPM), calculate the following values and complete the table. (Note: Use 2.7183 as the approximate value of e in your calculations.) Baker Corp. Value (Millions of dollars) Equity value Debt value Debt yield 5. Equity as an option Aa Aa Baker Corp. is a manufacturing firm. Baker Corp.'s current value of operations, including debt and equity, is estimated to be $500 million. Baker Corp. has $200 million face-value zero coupon debt that is due in three years. The risk-free rate is 5%, and the volatility of companies similar to Baker Corp. is 60%. Baker Corp.'s performance has not been very good as compared to previous years. Because the company has debt, it will repay its loan, but the company has the option of not paying equity holders. The ability to make the decision of whether to pay or not looks very much like an option. Based on your understanding of the Black-Scholes option pricing model (OPM), calculate the following values and complete the table. (Note: Use 2.7183 as the approximate value of e in your calculations.) Baker Corp. Value (Millions of dollars) Equity value Debt value Debt yield