The Odanak Corp. has filed for bankruptcy. All of there assets would fetch $43 million on the open market today if put up for sale. The other alternative would be to reorganize the business. If this occurs, the company would generate $3.97 million cash flows in perpetuity. Since there are no competitors making products similar to them, there is no company that can offer a comparable discount rate. Analysts estimate that the discount rate can be between 10% and 25%.

Questions

A) If the company's discount rate is 10%, should the company be liquidated or reorganized? B) Is the answer the same for 20% discount rate? C) What is the break even discount rate at which they would be indifferent between reorganization and liquidation?