Expected return on company debt


Task1. Salacious-Time Company is the regional chain department store. It will remain in the business for one more year. The probability of the boom year is 64 percent and probability of the recession is 36 percent. It is projected that the company will create a total cash flow of $212 million in the boom year and $80 million in the recession. The company's required debt payment at the end of year is $121 million. The market value of company's outstanding debt is $87 million. The company pays no taxes.

Question 1: What payoff do bondholders anticipate to receive in the event of recession?

Expected Payoff $___________

Question 2: What is the promised return on company's debt?

Promised Return____________%

Question 3: What is the expected return on company's debt?

Expected Return____________%

Request for Solution File

Ask an Expert for Answer!!
Finance Basics: Expected return on company debt
Reference No:- TGS04205

Expected delivery within 24 Hours