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I believe the answer is None of the above. Please show work/explain. A company has a 0.60 probability of a good year with operating cash
I believe the answer is "None of the above". Please show work/explain.
A company has a 0.60 probability of a good year with operating cash flow of $50,000; and 0.40 probability of a bad year with operating cash flow of $30,000. The company has a debt of $35,000 with 8 percent interest due next year. Assuming the company has no means of servicing its debt other than operations, and a 0% tax rate, which of the following is true?
- Shareholders expected claim is $12,200
- Creditors expected claim is $37,800
- Creditors expected claim is $34,680
- None of the above
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