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Smart Bet Corp. is expected to generate a single risky cash flow in one year. The cash flow will be $95M, with probability 0.8, or
Smart Bet Corp. is expected to generate a single risky cash flow in one year. The cash flow will be $95M, with probability 0.8, or $17M, with probability 0.2. The firm currently has $17.4M of debt due in one year. If it goes bankrupt it will incur $6M in bankruptcy costs. The cost of capital is 0. What is the expected bankruptcy cost (in $MM)? " $1.3 $1.0 $1.2 $0.8
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