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ABC Corp.'s expected cash flows, depending on the state of the economy, are presented in the table below. The firm wants to borrow $50. If
"ABC Corp.'s expected cash flows, depending on the state of the economy, are presented in the table below. The firm wants to borrow $50. If it goes bankrupt it will incur $10 in bankruptcy costs. The market interest rate is 0. If debtholders are fully aware of the risks, what kind of promised yield will they negotiate?" Probability CF Strong economy 0.5 $90 Weak economy 0.5 $40 45% A. B. 25% C. 30% 21% D CE. 40%
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