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Good time company is a regional chain department store. It will remain in business for one more year. The probability of a boom year is 60 percent...

Good time company is a regional chain department store.  It will remain in business for one more year.  The probability of a boom year is 60 percent and the probability of a recession is 40 percent.  It is projected that the company will generate a total cash flow of 250MM in a boom year and 100MM in a recession.  The company's required debt payment at the end of the year is 150MM.  The MV of the company's outstanding debt is $108.93 MM.  The company pays no taxes.  Assume a discount rate of 12 percent.
A. What payoff do bondholders expect to receive in the event of a recession?
B. What is the promised return on the company's debt?
C. What is the expected return on the company's debt?

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