The Sawmill Plans on Closing Its Doors After One More

Multiple Choice

The Sawmill plans on closing its doors after one more year.During its last year in business the firm expects to generate a cash flow of $74,000 if the economy booms and $57,000 if it does not.The probability of a boom is 15 percent.The firm has debt of $60,000 that is due in one year.That debt has a market value of $58,000 today.Ignore taxes.The current promised return on debt is ____ percent and the expected return on debt is ______ percent.

A) 3.78;-1.16
B) 3.45;-.95
C) 2.02;3.78
D) 3.45;2.67
E) 2.67;3.45