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FSA is a privately held firm. As an analyst trying to determine the value of FSAs common stock and bonds, you have estimated the market

FSA is a privately held firm. As an analyst trying to determine the value of FSAs common stock and bonds, you have estimated the market value of the firms assets to be $1 million and the standard deviation of the asset return to be .3. The debt of FSA, which consists of zero-coupon bank loans, will come due one year from now at its face value of $1 million. Assuming that the risk-free rate is 5 percent, use the Black-Scholes Model to estimate the value of the firms equity and debt.

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