The Do-All-Right Marketing Research firm has promised payments to their bondholders oneperiod

Question

from now that total $100. The company believes that there is a 85% chance that the
cash flow will be sufficient to meet these claims. However, there is a 15% chance that cash
flows will fall short, in which case total earnings are expected to be $65. If the bonds sell in the
market for $84, what is an estimate of the bankruptcy costs for Do-All-Right? Assume a cost
of debt of 10%.