Bart's Mart will have a value of $59,000 if the economy does well this next year and a value of $52,000 if the economy does poorly.The probability of a good economy is 72 percent.The firm owes its bondholders $12,000.What is the market value of the firm if it only operates for one more year?
A)$57,680
B)$54,650
C)$57,040
D)$56,560
E)$55,850

Question

Quizplus · Accepted Answer

Expected firm value = 0.72($59,000)+ (1 - 0.72)($52,000)= $57,040

Bart's Mart Will Have a Value of $59,000 If the Economy