Dusty Donuts has zero coupon debt with a face value of $10 million due in 3 years,and no other debt outstanding.The risk-free rate is 4%,but due to default risk the yield to maturity on the debt is 10%.Dusty's believes that in the event of default,10% of the losses are attributable to bankruptcy and distress costs.Estimate the present value of the distress costs.
A)$138 million
B)$138 thousand
C)$1.38 million
D)$1.38 thousand

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The Answer of Dusty Donuts has zero coupon debt with a face value of $10 million due in 3 years,and no other debt outstanding.The risk-free rate is 4%,but due to default risk the yield to maturity on the debt is 10%.Dusty's believes that in the event of default,10% of the losses are attributable to bankruptcy and distress costs.Estimate the present value of the distress costs.
A)$138 million
B)$138 thousand
C)$1.38 million
D)$1.38 thousand

Dusty Donuts Has Zero Coupon Debt with a Face Value