Question
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
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 % and the probability of a recession is 30%. It is projected that the company will generate a total cash flow of 185 million in a boom year and $ 76 million in a recession. The company's required debt payment at the end of the year is $110 million. The market value of the company's outstanding debt is $83 million. The company pays no taxes. What is the expected return on the company's debt
A. | 14.19% | |
B. | 20.24% | |
C. | 16.8% | |
D. | - 8.04% |
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