Need ASAP 1 1/2 hours Finance Major

Gladstone Corporation is about to launch a new product. Depending on the success of the newproduct, Gladstone may have one of four values nextyear: $150 million, $135 million, $95 million, and $80 million. These outcomes are all equallylikely, and this risk is diversifiable. Gladstone will not make any payouts to investors during the year. Suppose therisk-free interest rate is 5.0% and assume perfect capital markets.

a. What is the initial value ofGladstone's equity withoutleverage?

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

b. What is the initial value ofGladstone's debt?

c. What is theyield-to-maturity of thedebt? What is its expectedreturn?

d. What is the initial value ofGladstone's equity? What isGladstone's total value withleverage?

a. What is the initial value ofGladstone's equity withoutleverage?

The initial value ofGladstone's equity without leverage is $_____ million. (Round to two decimalplaces.)

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

b. What is the initial value ofGladstone's debt?

The initial value ofGladstone's debt is $______ million. (Round to two decimalplaces.)

c. What is theyield-to-maturity of thedebt? What is its expectedreturn?

Theyield-to-maturity is ______%. (Round to the nearestinteger.)

The expected return is _____%. (Round to one decimalplace.)

d. What is the initial value ofGladstone's equity? What isGladstone's total value withleverage?

The initial value ofGladstone's levered equity is $_____ million. (Round to two decimalplaces.)

Gladstone's total value with leverage is $_____ million. (Round to two decimalplaces.)