What is the value of the debt

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Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The value of Buckeye’s assets is currently $1,290. Luke Fickell, the CEO, believes that the assets in the firm will be worth either $860 or $1,380 in a year. The going rate on one-year T-bills is 7 percent.

a. What is the value of Buckeye's equity?

b. What is the value of the debt?

Suppose Buckeye can reconfigure its existing assets in such a way that the value in a year will be $940 or $1,840.

c. if the current value of the assets is unchanged, what is the value of Buckeye's equity?

Reference no: EM13836215

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