Good Time Company is a regional chain department store. It will remain in business for one more year. The probability of a boom year is 70 percent and the probability of a recession is 30 percent. It is projected that the company will generate a total cash flow of $191 million in a boom year and $82 million in a recession. The company's required debt payment at the end of the year is $116 million. The market value of the companys outstanding debt is $89 million. The company pays no taxes.

a. What payoff do bondholders expect to receive in the event of a recession?

b. What is the promised return on the company's debt?

c. What is the expected return on the company's debt?