The Merton model values the firm's equity as a European call option on the firm's assets. The market value of the debt (D) can be found using the fundamental accounting equation D = V - E, where V is the value of the firm's assets and E is the value of the firm's equity.

The Black-Scholes-Merton formula for equity is: E = V * N(d₁) - K * e^(-rt) * N(d₂)

Given values: V = 85 K = 55 r = 5% = 0.05 t = 2 N(d₁) = 0.9495 N(d₂) = 0.8983

Calculating E: E = 85 * 0.9495 - 55 * e^(-0.05 * 2) * 0.8983 E = 80.7075 - 55 * e^(-0.10) * 0.8983 E = 80.7075 - 55 * 0.904837 * 0.8983 E = 80.7075 - 44.7049 = 36.0026 million

Calculating D: D = V - E D = 85 - 36.0026 = 48.9974 million

Option A (CAD 48.996 million) is the closest estimate.