Miller Tool Plans on Closing Its Doors After One More

Multiple Choice

Miller Tool plans on closing its doors after one more year.During its last year in business,the firm expects to generate a cash flow of $76,000 if the economy booms and $58,000 if it does not.The probability of a boom is 15 percent.The firm has debt of $62,500 that is due in 1 year.That debt has a market value of $58,300 today.Ignore taxes.The current promised return on debt is ________ percent,and the expected return on debt is ________ percent.

A) 7) 20;8.13
B) 8) 18;1.03
C) 8) 18;9.12
D) 7) 20;0.64
E) 8) 36;1.98