For next year,the probability the economy will do well is 82 percent,and Importers Unlimited will have a firm value of $68,000.If the economy tanks,the firm's value will decline to $43,000.The firm owes its bondholders $50,000.What is the value of this firm to its shareholders if the firm will close after next year?
A)$14,760
B)$13,380
C)$18,000
D)$16,410
E)$13,520

Question

Quizplus · Accepted Answer

Expected firm value = 0.82($68,000 - $50,000)+ (1 - 0.82)($0)= $14,760

For Next Year,the Probability the Economy Will Do Well Is