6. (12 points) On December 31, the Do-A11-Right Marketing Research firm promised payments to its bondholders that total $100 one year later. The company believes that there is an 85% chance that the cash flow will be sufficient to meet these claims at the end of the year. However, there is a 15% chance that cash flows will fall short at the end of the year, in which case total earnings are expected to be $65, all of which would accrue to the bondholders in the event of no bankruptcy costs. If the bonds sell in the market December 31 for $84, and potential bankruptcy costs are in fact discounted into the current price of the bond, what is an estimate of the bankruptcy costs (per bond) on December 31, for Do-A11-Right? Hint: Compute the discounted value of the bond on December 31 assuming no bankruptcy costs. Then subtract result that from the current price of the bond, which includes the bankruptcy costs. To discount cash flows, assume a current cost of debt of 10%. 6. (12 points) On December 31, the Do-A11-Right Marketing Research firm promised payments to its bondholders that total $100 one year later. The company believes that there is an 85% chance that the cash flow will be sufficient to meet these claims at the end of the year. However, there is a 15% chance that cash flows will fall short at the end of the year, in which case total earnings are expected to be $65, all of which would accrue to the bondholders in the event of no bankruptcy costs. If the bonds sell in the market December 31 for $84, and potential bankruptcy costs are in fact discounted into the current price of the bond, what is an estimate of the bankruptcy costs (per bond) on December 31, for Do-A11-Right? Hint: Compute the discounted value of the bond on December 31 assuming no bankruptcy costs. Then subtract result that from the current price of the bond, which includes the bankruptcy costs. To discount cash flows, assume a current cost of debt of 10%