Agency costs: What is the expected value of the bonds to the lenders if the stockholders sell the debt?

Name: Agency costs: What is the expected value of the bonds to the lenders if the stockholders sell the debt?
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Question

Quizplus · Accepted Answer

The expected value of the bonds to the lenders if the stockholders sell the debt is $48.8 mm. This is because the stockholders will sell the debt for $88.8 mm, and the lenders will receive 55% of this amount, or $48.8 mm.

Agency Costs: What Is the Expected Value of the Bonds