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Suppose that on October 16, 2007 a firm loses a lawsuit and has to pay $100 million within 9 months.Currently it has no money to
Suppose that on October 16, 2007 a firm loses a lawsuit and has to pay $100 million within 9 months.Currently it has no money to pay, so it decides to sell a piece of equipment. Although the equipmentcould go for up to $150 million, the firm is desperate and is willing to take much less so as to make thelawsuit payment. A buyer comes up, who offers to buy the equipment at a significant discount and willpay for it in six months. The firm's CFO thinks that the deal might work if they enter into a futurescontract or a forward contract.
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