試題詳解

4.(4%) ABC Inc. will remain in business for one more year. The probability of a boom year is 60 percent and the probability of recession is 40 percent. It is projected that the company will generate a total cash flow of $60 million in a boom year and S30 million in a recession year. The company's required debt payment at the end of the year is $50 million. The market value of the company's outstanding debt is $40 million. The company pays no taxes. What is the expected rate of return on the company's debt?
(A) 5%
(B) 20%
(C) -4%
(D) -16%
(E) None of above