"A firm is expected to generate a single risky cash flow in one
year. The CF will be either $90 (with probability 0.6) or $30 (with
probability 0.4). All investors are risk neutral. The interest rate is 0. If the firm decides to borrow $50 and pay the amount as a dividend to shareholders, how much will be the promised return to creditors? Assume that, if bankruptcy happens, the firm will have to pay $5 to lawyers. A. 66.0% B. 21.40% C. 50.0 % D. 33.3% E. 75.0%
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