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Corporate Finance · Quiz 2 · 23 Nov 2025 · September 2025 term

Question 12: A farm is worth 40 thousand under flood (20% probability…

Question 12

+4 marksOne correct option

A farm is worth 40 thousand under flood (20% probability) or 150 thousand in no flood situation (80% probability) next year. The farm was purchased for 100 thousand, financed by a loan of 80 thousand and equity of 20 thousand. The loan requires a promised repayment of 110 thousand. What is the expected payoff for the equity owner next year (in thousands)?

  1. A

    0

  2. B

    20

  3. C

    32

  4. D

    40

Show answer

Correct answer

  • C

    32

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Question 12 of 25 in the IIT Madras BS Corporate Finance (Corporate Finance) Quiz 2 paper sat on 23 Nov 2025, in the September 2025 term (IIT M DEGREE AN EXAM QDB2 23 Nov 2025 NEW). It carries 4 marks.

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