A. Fethe Inc. is a custom manufacturer of guitars, mandolins, and other stringed instruments and is located near Knoxville, Tennessee. Fethe's current value of operations, which is also its value of debt plus equity, is estimated to be $6 million. Fethe has $2 million face value, zero coupon debt that is due in 2 years. The risk-free rate is 5%, and the standard deviation of returns for companies similar to Fethe is 55%. Fethe's owners view their equity investment as an option and would like to know the value of their investment.

1.) Using the Black-Scholes option pricing model, how much is Fethe's equity worth? Enter your answer in millions.

2.) How much is the debt worth today? Enter your answer in millions

3.) What is its yield? Do not round intermediate calculations. Round your answer to one decimal place.

4.) How would the equity value change if Fethe's managers could use risk management techniques to reduce its volatility to 30%? Enter your answer in millions.

5.) How would the yield on the debt change if Fethe's managers could use risk management techniques to reduce its volatility to 30%?