Strudler Real Estate, Inc., a construction company financed by both debt and equity, is undertaking a new project. If the project is successful, the value of the company in one year will be $350 million, but if the project is a failure, the company will be worth only $225 million. The current value of the company is $265 million, a figure that includes the prospects for the new project. The company has zero coupon bonds due in one year with a face value of $295 million. Treasury bills that mature in one year have an EAR of 8 percent. The company pays no dividends.

a.	Use the two-state option pricing model to calculate the current value of the companys debt and equity. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
b.	Suppose the company has 750,000 shares of common stock outstanding. What is the price per share of the companys equity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c.	Suppose that in place of the preceding project, management decides to undertake a project that is even more risky. The value of the firm will either increase to $385 million or decrease to $210 million by the end of the year. Surprisingly, management concludes that the value of the firm today will remain at exactly $265 million if this risky project is substituted for the less risky one. Use the two-state option pricing model to determine the values of the companys debt and equity if the firm plans on undertaking this new project. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
d.	Which project do bondholders prefer?