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Rackin Pinion Corporation’s assets are currently worth $1,240. In one year, they will be worth either...

Rackin Pinion Corporation’s assets are currently worth $1,240. In one year, they will be worth either $1,200 or $1,490. The risk-free interest rate is 7 percent. Suppose the company has an outstanding debt issue with a face value of $1,000. a. What is the value of the equity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Equity value $ b-1 What is the value of the debt? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Debt value $ b-2 What is the interest rate on the debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to the nearest whole number, e.g., 32.) Interest rate % c. Would the value of the equity go up or down if the risk-free rate were 8 percent? Increase Decrease

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