Gladstone Corporation is about to launch a new product. Depending on the success of the new product, Gladstone may have one of four values next year: $147 million, $136 million, $91 million, or $82 million. These outcomes are all equally likely, and this risk is diversifiable. Suppose the risk-free interest rate is 5% and that, in the event of default, 26% of the value of Gladstone's assets will be lost to bankruptcy costs. (Ignore all other market imperfections, such as taxes.)

a. What is the initial value of Gladstone's equity without leverage?

Now suppose Gladstone has zero-coupon debt with a $100 million face value due next year.

b. What is the initial value of Gladstone's debt?

Suppose Gladstone has 10 million shares outstanding and no debt at the start of the year.

c. If Gladstone does not issue debt, what is its share price?