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Sunburn Sunscreen has a zero coupon bond issue outstanding with $20,000 face value that matures in one year. The current market value of the firms
Sunburn Sunscreen has a zero coupon bond issue outstanding with $20,000 face value that matures in one year. The current market value of the firms assets is $20,000. The value of the firms asset is going to be either $23,000 or $18,000 next year. The annual risk-free rate is 5% per year.
What is the market value of the firms equity and debt?
a. | Equity =1714.3, Debt =18285.7 | |
b. | Equity =2857.1, Debt =17142.9 | |
c. | Equity =1500.0, Debt =18500.0 | |
d. | Equity =952.4, Debt =19047.6 | |
e. | Equity =0, Debt =20000.0 |
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