Q: Calculate the market value of debt and ordinary shares

You are given the following information regarding Grange Holdings Ltd: Bonds: 63,282 zero-coupon bonds (i.e. the coupon rate is 0% per annum) were issued four years ago. The bonds originally. had a 30-years maturity with a yield to maturity of 5.0% per annum. Interest rates have recently increased, and the bonds have now a yield to maturity of 6.0% per annum. Each bond's face value is $1000. Ordinary shares: 345,000 shares selling at $73.50 per share. The stock has a beta of 0.90 and will pay a dividend of $3.35 next year. The dividend is expected to grow at 5% per year indefinitely. Market: 12% expected return, risk-free rate of 5.0% and a 28% tax rate