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What will the value of this settlement liability be

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Reference no: EM133190250

Question - Careless Inc. is being sued by a dissatisfied customer and expects to have to pay compensation. They estimate the eventual settlement to be: Optimistic (30% chance) $100,000; Pessimistic (30% chance) $300,000; Mid-range (40% chance) $200,000. The settlement will be paid out next year, and the company generally borrows money at 5%. What will the value of this settlement liability be?

a. $100,000

b. $190,000

c. $200,000

d. $210,000

Reference no: EM133190250

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