1. 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: $150, $135, $95, and $80. 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, 25% of the value of Gladstones assets will be lost to bankruptcy costs. If Gladstone's zero-coupon debt has a $93 face value due next year. What is the initial value of Gladstones debt?
2. 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: $150, $135, $95, and $80. 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, 25% of the value of Gladstones assets will be lost to bankruptcy costs. If Gladstone's zero-coupon debt has a $112 face value due next year. What is the initial value of Gladstones debt?
3. 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: $150, $135, $95, and $80. 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, 25% of the value of Gladstones assets will be lost to bankruptcy costs. If Gladstone's zero-coupon debt has a $102 face value due next year. What is the value of Gladstones equity?