Business, 05.05.2020 22:05, washingtonisaia

Good Time 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 $204 million in a boom year and $95 million in a recession. The company's required debt payment at the end of the year is $129 million. The market value of the company’s outstanding debt is $102 million. The company pays no taxes.

a. What payoff do bondholders expect to receive in the event of a recession?

b. What is the promised return on the company's debt?

c. What is the expected return on the company's debt?

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Good Time Company is a regional chain department store. It will remain in business for one more year...