Suppose you have a company, which, starting next year, will either generate 200 every year forever, or 100 every year forever (with equal probability). Assume no systematic risk; r_f is 10%. All uncertainty will be resolved at date 1.

Suppose now this company issues perpetual debt with a face value of 1500 and a 10% coupon. That means that the company promises to pay $150 in interest payments every year; if it fails to pay this debt service, the bondholders get to seize the company. If the bondholders seize the company, they get all cash flows forever. Assume no taxes.

Suppose now that there is a one-time $11 bankruptcy cost. That means that if the company fails to meet its debt service obligation of $150, it will have to pay a fee of $11. What is the total value of the company?