Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of Happy Time Inc. today, what is your expected percentage return on this investment? Economy Probability Boom 0.3 Normal 0.4 Recession 0.3 O 36.87% O-26.37% Cash flow in the next year Amount $110 million $101 million $61 million O-16.63% O 64.8%
Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of Happy Time Inc. today, what is your expected percentage return on this investment? Economy Probability Boom 0.3 Normal 0.4 Recession 0.3 O 36.87% O-26.37% Cash flow in the next year Amount $110 million $101 million $61 million O-16.63% O 64.8%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a
face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of
Happy Time Inc. today, what is your expected percentage return on this investment?
Economy Probability
Boom
0.3
Normal 0.4
Recession 0.3
O 36.87%
O-26.37%
O-16.63%
Cash flow in the next year
Amount
$110 million
$101 million
$61 million
O 64.8%
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