Testir Corp. has outstanding zero coupon debt of $600 million, so $600 million is due at the end of year 1. Testir begins a risky corporate strategy. Management estimates with a 60% probability, that the companys total will be worth $800 million at the end of year 1. A 40% probability is that the company will be worth $500 million. If bankruptcy occurs, the distress costs will be 15% of the total asset value. Testirs cost of capital is 8%.

- What is the present value of the companys $600 million in debt?

- What is the present value of the equity?

- Use a table to answer the question.