A New Business Opportunity Has a 70% Chance of Being

question 12

Multiple Choice

A new business opportunity has a 70% chance of being worth $500,000 next year and a 30% chance of being worth $100,000. The appropriate expected rate of return is 10%.
-Refer to the information above. The new opportunity will be financed with a $150,000 bank loan. What is the expected future payoff for the levered equity holder? Round your answer to
The nearest dollar.

• A)$245,000
• B)$195,455
• C)$222,727
• D)$215,000

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