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kumpel [21]
3 years ago
14

TL Company has expected earnings of $75 in one year if it does well and $25 if it does poorly. The firm has outstanding debt of

$50 that is due in one year. However, given the financial distress costs, the debtholders will only receive $40 in one year if the firm does well and $15 if it does poorly. There is a 60 percent chance the firm will do well and a 40 percent chance that it will do poorly. What is the current value of the debt if the interest rate on bonds is 8 percent
Business
1 answer:
Juliette [100K]3 years ago
3 0

Answer:$27.78

Explanation:

Expected value of debt after one year = (40* .60)+(15*.40)

= 24 + 6

=$ 30

Current value of debt = Value at 1year / (1+r)^n

= 30/ (1+.08)^1

= 30 / 1.08

=$ 27.78

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Answer:

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3 years ago
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Which of the following statements about minimum payments is incorrect
zhuklara [117]
Is this the whole question?
6 0
3 years ago
How would a company's working capital be affected if a substantial amount of accounts payable were paid in cash?
rosijanka [135]

If a company pays most of the major payments through cash it means its cash flow will be reduced due to the company’s working capital will also reduce but the current liabilities will remain unchanged.

Cash flow includes in Current assets of the company and is considered to be the strength of the company's working capital. therefore with the cash payments company's current assets will reduce and this reduction weakens working capital.

For example, Individual A pays most of the payments through cash and his current assets are being reduced due to that his working capital would also reduce with its cash flow but the liabilities will remain unchanged as they are long-term debt.

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3 0
2 years ago
Wattan Company reports beginning inventory of 20 units at $44 each. Every week for four weeks it purchases an additional 20 unit
nydimaria [60]

Answer:

The cost of goods available for sale is $4,760

Explanation:

Goods available for sales include all those goods which is available on the beginning of the period and all the purchases / production during the period.

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Purchases for the month = $900 + $920 + $980 + $1,080

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Cost of Goods available for sale = Beginning Inventory + Purchase for the month = $880 + $3,880 = $4,760

6 0
3 years ago
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