A new business opportunity has a 70% chance of being worth $500,000 next year and a 30% chance of being worth $100,000. The appropriate expected rate of return is 10%.
-Refer to the information above. The new opportunity will be financed with a $150,000 bank loan. What is the expected future payoff for the levered equity holder? Round your answer to
The nearest dollar.
A)$245,000
B)$195,455
C)$222,727
D)$215,000

Question

Quizplus · Accepted Answer

The Answer of A new business opportunity has a 70% chance of being worth $500,000 next year and a 30% chance of being worth $100,000. The appropriate expected rate of return is 10%.
-Refer to the information above. The new opportunity will be financed with a $150,000 bank loan. What is the expected future payoff for the levered equity holder? Round your answer to
The nearest dollar.
A)$245,000
B)$195,455
C)$222,727
D)$215,000

A New Business Opportunity Has a 70% Chance of Being