Bondholders expect to receive in event of recession

Assignment Help Financial Management

Reference no: EM132061005

Mid States Company is a regional chain department store. It will remain in business for one more year. The probability of a boom year is 80 percent and the probability of a recession is 20 percent. It is projected that the company will generate a total cash flow of $196 million in a boom year and $87 million in a recession. The company's required debt payment at the end of the year is $121 million. The market value of the company’s outstanding debt is $94 million. The company pays no taxes.

a. What payoff do bondholders expect to receive in the event of a recession? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.)

Payoff $

b. What is the promised return on the company's debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Promised return %

c. What is the expected return on the company's debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return %

Reference no: EM132061005

Questions Cloud

What is the after-tax cost of new preferred shares : What is the after-tax cost of new preferred shares for Kresler if the flotation (issuance) costs for preferred shares are 5 percent?

How much is the company net working capital : What is the value of the shareholders’ equity account for this firm? How much is the company's net working capital?

Measure and interpret the market risk or beta of security : How can you measure and interpret the market risk, or beta, of a security?

How would eps be impacted if the firm borrowed money : How would EPS be impacted if the firm borrowed the money for the repurchase at 10% and the tax rate is 35%?

Bondholders expect to receive in event of recession : What payoff do bondholders expect to receive in the event of a recession? What is the expected return on the company's debt?

Calculate the average length of stay : calculate the average length of stay for Mountainside Medical Center:

Calculate the payback period for the proposed investment : calculate the payback period for the proposed investment in a digital mammography scanner by Rockpile Radiology.

Calculate present value factor for your discounted cash flow : You can use the formula 1/(1+r)n to calculate a present value factor for your discounted cash flows.

Importance of cost centers in the revenue cycle processes : Explain the importance of cost centers in the revenue cycle processes? Feel free to share any relevant experiences.

User Account

All Pages