What is the new contracted loan amount owed to mm bank

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Problem 1: CBA Ltd. is in financial distress and has two loans outstanding: one loan borrowed from MM Bank with an amount of $55 million. The other loan with the amount of 30 million is from a senior bank that has a higher priority to get paid than other debtholders. If CBA Ltd. wants to liquidate and default on its loans, the liquidation value is $55 million. If the company continues its business, CBA Ltd.'s management's special skills will lead to a payoff of $89.6 million with a probability of 0.8, otherwise zero. For the management to continue, CBA Ltd. would have to be paid $7 million. If restructuring the loan to continue the business, what is the new contracted loan amount owed to MM bank?

Reference no: EM132911165

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