Suppose Tefco Corp. has a value of $$100$ million if it continues to operate, but has outstanding debt

of $$120$ million that is now due. If the firm declares bankruptcy, bankruptcy costs will equal $$20$

million, and the remaining $$80$ million will go to creditors. Instead of declaring bankruptcy,

management proposes to exchange the firm$$s debt for a fraction of its equity in a workout. What is

the minimum fraction of the firm$$s equity that management would need to offer to creditors for

the workout to be successful?