Visually, from the graph, for a promised payoff of $45,000, the expected payoff is around $40,000. The

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Visually, from the graph, for a promised payoff of $45,000, the expected payoff is around $40,000. The correct value can be obtained by plugging into Formula 6.1 on page 163:

E(Payoff(Loan Promise = $45,000)) = $20,000 + 80% . ($40,000 − $20,000)

+ 60% . ($45,000 − $40,000)

= $39,000

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Corporate Finance An Introduction

ISBN: 9780321277992

1st Edition

Authors: Ivo Welch

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Question Posted: Oct 25, 2024 08:01 AM

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Visually, from the graph, for a promised payoff of $45,000, the expected payoff is around $40,000. The

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Corporate Finance An Introduction

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