Burtons Inc., was taken private through an LBO transaction many years ago. The company is now carrying a considerable amount of debt in the form of a zero-coupon bond with a face value of $3.0B which needs to be repaid in three years. The estimated market value of the Burtons underlying business is $2.5B, and the volatility of the underlying business is 35.0%.

Using a risk-free rate of 1.5%:

1. What is the equity worth in this business?

2. What if the value of the debt

3. What is the yield to maturity of the debt?