Unobserved Firm Volatility Is an Obstacle in the Implementation of the Merton

Unobserved firm volatility is an obstacle in the implementation of the Merton model. One popular way to overcome this is to

A) Use the model only on non-financial firms.
B) Use equity prices to back out firm volatility.
C) Use equity volatility in place of asset volatility in implementing the model.
D) Use data on closely-related firms from the same sector to infer this volatility.