Frostbite Thermalwear has a zero coupon bond issue outstanding with a face value of $39,000 that matures in one year. The current market value of the firms assets is $42,400. The standard deviation of the return on the firms assets is 40 percent per year, and the annual risk-free rate is 6 percent per year, compounded continuously.

A. Based on the Black-Scholes model, what is the market value of the firm's equity and debt? B. What is the firm's continuously compounded cost of debt?