We take into consideration a company, whose equity is 11 million euros.
The company’s debt is equal to 18 million euros and it must be paid in one year.
The risk-free rate on the market is 6% per annum.
The observed instantaneous volatility of equity is 0.7.Assume and . The risk-free rate on the market is 6% per annum, and . What should be the market value of the company today, , in order to have a 1-year PD equal to 2%, according to Merton's model (round off the final result to the 2nd decimal, e.g. 10.22)?