Indigo Books owns assets that have a 75% probability of having a market value of...
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Indigo Books owns assets that have a 75% probability of having a market value of $550M and a 25% probability that the assets will be worth $200M in one year. The firm will not generate cash flows thereafter. The current risk-free rate is 3% and the discount rate on the assets is 6%. Suppose Indigo has debt due in one year of $150M. If MM holds implying a perfect market, what is the value of Indigo's equity?
$300.0M
$290.7M
$287.3M
$316.9M
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