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Business, 22.08.2019 02:30 tayjohnson0042

Bedrock company has $70 million in debt and $30 million in equity. the debt matures in 1 year and has a 10% interest rate, so the company is promising to pay back $7 million to its debt holders 1 year from now. the company is considering two possible investments, each of which will require an upfront cost of $100 million. each investment will last for 1 year, and the payoff from each investment depends on the strength of the overall economy. there is a 50% chance that the economy will be weak and a 50% chance it will be strong.

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