The Window Store will have a value of $163,000 if the economy does well this coming year and a value of $142,000 if the economy does poorly.The probability of a good economy is 55 percent.The firm owes its bondholders $54,000.The firm will only operate for one more year.What is the value of this firm to its shareholders?
A)$98,500
B)$99,550
C)$100,450
D)$153,550
E)$154,450

Question

Quizplus · Accepted Answer

Shareholder value = .55 × ($163,000 - 54,000)+ .45 × ($142,000 - 54,000)= $99,550

The Window Store Will Have a Value of $163,000 If