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Problem 17-18 Equity as an Option Sunburn Sunscreen has a zero coupon bond issue outstanding with a $24,000 face value that matures in one year.
Problem 17-18 Equity as an Option Sunburn Sunscreen has a zero coupon bond issue outstanding with a $24,000 face value that matures in one year. The current market value of the firm's assets is $24,900. The standard deviation of the return on the firm's assets is 32 percent per year, and the annual risk-free rate is 5 percent per year, compounded continuously. Based on the Black-Scholes model, what is the market value of the firm's equity and debt? (Do not round intermediate calculations and round your final answers to 2 decimal places (e.g., 32.16).) Market value Equity Debt
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