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Question 10 1 points Save Answer ABC Corp. is expected to generate a single cash flow in a year. The possible values for the cash
Question 10 1 points Save Answer ABC Corp. is expected to generate a single cash flow in a year. The possible values for the cash flow, depending on the state of the economy, are presented in the table below. The firm wants to borrow $50 and pay that out as a dividend. If it goes bankrupt it will incur $10 in bankruptcy costs. The market interest rate is 0. If the creditors are fully aware of the risks, what kind of promised return will they negotiate? Probability CF $90 Strong economy 0.6 Weak economy 0.4 O 40% $40 O 25% O 27% O 20% O 21%
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