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 $480 million, but if the project is a failure, the company will be worth only $290 million. The current value of the company is $330 million, a figure that includes the prospects for the new project. The company has outstanding zero coupon bonds due in one year with a face value of $360 million. Treasury bills that mature in one year have an EAR of 9 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. (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

b.	Suppose the company has 970,000 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 company will either increase to $515 million or decrease to $275 million by the end of the year. Surprisingly, management concludes that the value of the company today will remain at exactly $330 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 company plans on undertaking this new project. (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Value of debt = ? Value of equity = ?