Century Aluminium owns assets that have a 70% probability of having a market value of...

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Century Aluminium owns assets that have a 70% probability of having a market value of $850M and a 30% probability that the company will default next year. The firm will not generate cash flows thereafter. The current risk-free rate is 5%. Suppose Century has outstanding debt that has a market value today of $500M and is due in one year. The cost of debt is 6.25% and the unlevered cost of equity is 7%. The capital market is perfect, if Century promised to pay its creditors an interest payment $50 next year, what is the value of the assets of the company in the default scenario? $466.7 $531.3 $487.5 $500.0

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