Question: Question 6 (1 point) INCLUDE WRITTEN SOLUTION WestAce will generate a terminal cash flow of $370M or $110M in one year, each with equal likelihood.

Question 6 (1 point) INCLUDE WRITTEN SOLUTION WestAce will generate a

Question 6 (1 point) INCLUDE WRITTEN SOLUTION WestAce will generate a terminal cash flow of $370M or $110M in one year, each with equal likelihood. WestAce's outstanding debt has a correct market value today of $120M and is due in a year. The cost of debt (rD) is 15% and the unlevered cost of equity (ru) is 20%. The capital market is perfect (no taxes, distress costs, etc.) What is the yield to maturity on the WestAce debt? 34.3% 36.3% 38.3% 40.3%

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