Given the Following Information for a Company in a Developing

question 8

Multiple Choice

Given the following information for a company in a developing market,estimate the value of the company.The cash for the next year is estimated to be either $200 in the business-as-usual scenario or $50 in the distress scenario.The probabilities of the scenarios are 80 percent and 20 percent,respectively.The expected perpetual growth rate in each case is 5 percent per year,and the cost of capital is 11 percent.The value of the company is closest to:

• A)$1,654.55
• B)$2,500.00
• C)$2,833.33
• D)$3,333.33