The Market Value of Delaware East's Assets Is $100 Mn

question 10

Short Answer

The market value of Delaware East's assets is $100 mn.The firm has one issue of pure-discount debt outstanding which promises to pay $60 mn.in 5 years.If the standard deviation of the firm's assets is 22% and the risk-free rate is 5%, what are the values of the firm's equity and debt, based on the Black-Scholes model?
$\begin{array}{l}\begin{array}{ll}&\text { value of equity}&\text { value of debt }\\a.&\$ 54 \mathrm{mn} . & \$ 46 \mathrm{mn} . \\b.&\$ 46 \mathrm{mn} . & \$ 54 \mathrm{mn} . \\c.&\$ 38 \mathrm{mn} . & \$ 62 \mathrm{mn} . \\d.&\$ 30 \mathrm{mn} . & \$ 70 \mathrm{mn} .\end{array}\end{array}$

---

Definitions:

Older Adults

Individuals who are in the later stage of their life, often defined as being 65 years of age or older.

Osteoporosis

A medical condition characterized by weakened bones, making them fragile and more likely to break.

Daily Walking

A routine of walking every day to improve or maintain physical and mental health.

Supplemental Hormones

Externally administered hormones used to treat deficiencies or imbalances in the body's natural hormone levels.