Suppose Blackstone raises $1 billion in the form of strip financing to be used in a leveraged buyout. The strip financing is composed of three items: $450 million are raised from the issuance of senior notes, $400 million from the issuance of subordinated notes further described below, and $150 million from the issuance of common shares. The $400 million of subordinated notes are subsidized in that they promise to pay only 5% interest, even though the fair yield to maturity on comparable bonds is 10%. In contrast, the senior notes offer a fair market rate of interest. For the next two years, The LBO firm is scheduled to pay interest plus an additional $200 million each year to pay off the subordinated notes over that time period. The corresponding scheduled principals for the subordinated notes are given in the table below. Using this information, answer the below questions.

Year	0	1	2
Principal	400	200	0

Be sure to answer all of the parts of the question and clearly label your answer for each part. For example, begin your answer to part A with Part A:

A. (4 points) What is the NPV of the subordinated notes component of the strip from the perspective of the strip investors?

B. (3 points) What would be the NPV of the subordinated notes component if the fair yield to maturity on such notes were actually 5%?

C. (4 points) Given your answer to part (a), what must be the market value of the equity component of the strip in order for strip investors to break even overall (that is, to get a zero NPV overall)?