Use the Information for the Question(s)below

question 10

Multiple Choice

Use the information for the question(s) below.
Monsters Incorporated (MI) is ready to launch a new product.Depending upon the success of this product,MI will have a value of either $100 million,$150 million,or $191 million,with each outcome being equally likely.The cash flows are unrelated to the state of the economy (i.e.risk from the project is diversifiable) so that the project has a beta of 0 and a cost of capital equal to the risk-free rate,which is currently 5%.Assume that the capital markets are perfect.
-Suppose that MI has zero-coupon debt with a $125 million face value due next year.The yield to maturity of MI's debt is closest to:

• A)12.5%.
• B)7.8%.
• C)25.0%.
• D)5.0%.

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Definitions:

Immigration

The act of moving to a foreign country to live permanently.

Benefits of Immigration

Refers to the positive economic, social, and cultural contributions immigrants make to a host country, including workforce diversification, innovation, and demographic vitality.

Labor Standards

Regulations and laws prescribing the minimum conditions (such as wages, hours, safety) that employers must provide to workers.

Developing Countries

Nations with a lower standard of living, undeveloped industrial base, and lower Human Development Index relative to other countries.