Question 25 (4 points) 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 60 percent and the probability of a recession is 40 percent. It is projected that the company will generate a total cash flow of $250 million in a boom year and $100 million in a recession. The company's required debt payment at the end of the year is $ 150 million. The market value of the company's outstanding debt is $108.93 million. The company pays no taxes. Assume a discount rate of 12 percent. What is the expected return on the company's debt? 40.00% 12.00% 37.70% 19.34% 60.00% Question 20 (4 points) Tom Scott is the owner of, president, primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $500,000 per year; if he works a 50-hour week, the company's EBIT will be $600,000 per year. The company is currently worth $3 million. The company needs a cash infusion of $2 million, and it can issue equity or issue debt with an interest rate of 9 percent. Assume there are no corporate taxes. What is the annual cash flow to Tom if he works 40 hours each week and the company issues debt? $ 260,000 $ 320,000 $ 300,000 $360,000 $ 420,000 Question 21 (4 points) Tom Scott is the owner of, president, primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $500,000 per year; if he works a 50-hour week, the company's EBIT will be $600,000 per year. The company is currently worth $3 million. The company needs a cash infusion of $2 million, and it can issue equity or issue debt with an interest rate of 9 percent. Assume there are no corporate taxes. What is the annual cash flow to Tom if he works 50 hours each week and the company issues equity? $ 360,000 $ 420,000 $ 320,000 $ 260,000 $ 300,000