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Corona 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
Corona 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 $20 in bankruptcy costs. The market interest rate is 0. What are the expected costs of bankruptcy?"
Probability CF Strong economy 0.6 $90 Weak economy 0.4 $40 A. $14
B. $12
C. $6
D. $10
E. $8
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