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Sunburn Sunscreen has a zero coupon bond issue outstanding with a $15,000 face value that matures in one year. The current market value of the

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Sunburn Sunscreen has a zero coupon bond issue outstanding with a $15,000 face value that matures in one year. The current market value of the firm's assets is $16,200. The standard deviation of the return on the firm's assets is 34 percent per year, and the annual risk-free rate is 6 percent per year, compounded continuously. The firm is considering two mutually exclusive investments. Project A has an NPV of $1,900, and Project B has an NPV of $2,800. As the result of taking Project A, the standard deviation of the return on the firm's assets will increase to 46 percent per year. If Project B is taken, the standard deviation will fall to 29 percent per year. a-1. What is the value of the firm's equity and debt if Project A is undertaken? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Market value Equity Debt a- What is the value of the firm's equity and debt if Project B is undertaken? (Do not 2. round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Market value Equity Debt b. Which project would the stockholders prefer? Project A O Project B c. Suppose the stockholders and bondholders are in fact the same group of investors. Would this affect your answer to (b)? No

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