Question
KL is ready to launch a new product. Depending upon the success of this product, KL will have a value of either $50 million, $60
KL is ready to launch a new product. Depending upon the success of this product, KL will have a value of either $50 million, $60 million, or $70 million, with each outcome being equally likely. The project has a beta of 0 and a cost of capital equal to the riskfree rate, which is currently 5%. Assume that the capital markets are perfect. Suppose that KL has zerocoupon debt with $55 million due next year. The value of debt of KL now is closest to (round up to two decimals places):
Select one:
a. $50.79 million
b. $49.79 million
c. $52.79 million
d. $51.79 million
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