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a. Suppose I make the following assumptions: FCFs are normally distributed Average yearly FCF is $500 million Annual standard dev. of FCF is $100 million
a. Suppose I make the following assumptions: FCFs are normally distributed Average yearly FCF is $500 million Annual standard dev. of FCF is $100 million WACC for FCF is 10%. Firm has $2 billion of debt bearing 6% interest. What is the probability of default?
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.0072% .0069% .0058%
b. What is the cost of distress given default in $B?
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3
2
1
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