Sunburn Sunscreen has a zero coupon bond issue outstanding with a $29,000 face value that matures in one year. The current market value of the firm's assets is $30,700. 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 $2,200, and Project B has an NPV of $3,100. As the result of taking Project A, the standard deviation of the return on the firm's assets will increase to 49 percent per year. If Project B is taken, the standard deviation will fall to 30 percent per year.

a-1.What is the value of the firm's equity and debt if Project A is undertaken?

Market value

Equity$: ?

Debt$: ?

a-2.What is the value of the firm's equity and debt if Project B is undertaken?

Market value

Equity$: ?

Debt$: ?