Two-State Option Pricing and Corporate Valuation

Strudler Real Estate Ltd., a construction firm financed by both debt and equity, is undertaking a new project. If the project is successful, the value of the firm in one year will be $410 million, but if the project is a failure, the firm will be worth only $255 million. The current value of Strudler is $295 million, a figure that includes the prospects for the new project. Strudler has outstanding zero-coupon bonds due in one year with a face value of $325 million. Treasury bills that mature in one year yield a 6 percent EAR. Strudler pays no dividends.

Suppose Strudler has 850,000 shares of common stock outstanding. What is the price per share of the firms equity?