Question: In the following example, we only look at the next operating year. Economic forecasts are rather bleak, with a 70% chance of a downturn and
In the following example, we only look at the next operating year. Economic forecasts are rather bleak, with a 70% chance of a downturn and only a 30% chance of an upswing. We look at 2 companies in particular, H students and HR students. They get the same profit if there is a boom, 3.5 million, but only half a million if there is an economic downturn. The installments of UI students are 1,350,000, but it is 1.6 million for HR students. We do not assume taxes in this example, but both of these companies are offered an interest rate of 12.75%. What will be the expected payment flow for the owners ie. shareholders and bondholders of both companies and the value of these two companies based on the given assumptions?
A. 252,174; 652,174; 173,913; 730,435; 904,348; 832,865
B. 1,331,858; 685,841; 1,176,991; 840,708; 1,767,699; 1,517,699
C. 878,261; 652,174; 695,652; 834,435; 1,530,435; 1,530,435
D. 1,331,858; 685,841; 1,176,991; 840,708; 2,017,699; 2,017,699
E. 1,331,858; 685,841; 1,176,991; 730,435; 904,348; 832,865
F. 252,174; 652,174; 173,913; 730,435; 904,348; 904,348
G. 572,062; 669,623; 505,543; 736,142; 1,241,685; 1,241,685
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