Use the Information for the Question(s)below

question 82

Multiple Choice

Use the information for the question(s) below.
JR Industries has a $20 million loan due at the end of the year and under its current business strategy its assets will have a market value of only $15 million when the loan comes due.JR is considering a new much riskier business strategy.While this new riskier strategy can be implemented using JR's existing assets without any additional investment,the new strategy has only a 40% probability of succeeding.If the new strategy is a success,the market value of JR's assets will be $30 million,but if the strategy fails the assets will be worth only $5 million.
-What is the expected payoff to debt holders under JR's new riskier business strategy?

• A)$20 million
• B)$4 million
• C)$15 million
• D)$11 million

---

Definitions:

Mortgage Payable

A liability representing money owed on a long-term loan used to purchase property, typically secured by the property itself.

Financing Activities

Transactions related to raising capital and repaying shareholders, including issuing equity, obtaining loans, and paying dividends.

Investing Activities

Transactions that involve the purchase or sale of long-term assets and investments are considered investing activities.

Non-current Assets

Non-current assets are long-term resources owned by a company, expected to provide economic benefits beyond one year, such as property, plant, and equipment (PP&E), and intangible assets.