Question
I keep getting the expected return wrong in part C please help Mid States Company is a regional chain department store. It will remain in
I keep getting the expected return wrong in part "C" please help
Mid States Company is a regional chain department store. It will remain in business for one more year. The probability of a boom year is 80 percent and the probability of a recession is 20 percent. It is projected that the company will generate a total cash flow of $199 million in a boom year and $90 million in a recession. The company's required debt payment at the end of the year is $124 million. The market value of the company's outstanding debt is $97 million. The company pays no taxes.
a.What payoff do bondholders expect to receive in the event of a recession?(Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.)
Payoff$90000000
90000000 Correct
b.What is the promised return on the company's debt?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Promised return27.83
27.83 Correct
%
c.What is the expected return on the company's debt?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Expected return22
22 Incorrect
%
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