The current value of a firm is $1,400. The firm has $1,000 in pure discount debt due in one year and the risk-free rate is 6%. The firm's assets will be worth either $1,200 or $1,500 in one year. What is the current value of the firm's equity?
A) $318
B) $421
C) $457
D) $943
E) $1,400
Correct Answer:
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