Question
In: Finance
Sunburn Sunscreen has a zero coupon bond issue outstanding with a $14,000 face value that matures...
Sunburn Sunscreen has a zero coupon bond issue outstanding with
a $14,000 face value that matures in one year. The current market
value of the firm’s assets is $15,300. The standard deviation of
the return on the firm’s assets is 44 percent per year, and the
annual risk-free rate is 5 percent per year, compounded
continuously.
Based on the Black–Scholes model, what is the market value of the
firm’s equity and debt? (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g.,
32.16.)
| Market value | ||
| Equity | $ | |
| Debt | $ | |
Solutions
Expert Solution
NO INTERMEDIATE ROUNDING IS DONE AS WRITTEN IN THE SUM.
BUT SOMETIMES, IN BOOK, THEY HAVE ROUNDED TILL 4 DECIMALS. SO IF
YOU FIND SOME DIFFERENCE IN ANSWER, IT IS PURELY ROUNDING
DIFFERENCE. LET ME KNOW, IF ANY SUCH ISSUE ARISES. THIS IS A VERY
GOOD SUM FROM "ROSS BOOK"
jeff jeffy answered 1 year agoRelated Solutions
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