HOW to Use Excel Solver to find the value of d1 that makes the Merton model equation equal to zero. To do this, we need to set up a Solver model that changes the value of d1 to minimize the difference between the left-hand side and right-hand side of the equation.

QuestionThe equity value of a company is 2 million and the stock volatility is estimated at 50%. The amount of debt to reimburse in 1-year is 5 million and the annual risk-free rate is 4%.