• The time it will take for these scenarios to develop
• The probability of the expected outcomes in each scenario
• The cash flow associated with each of the potential outcomes
• The risks associated with the receipts of those cash flows
The facts and circumstances often surrounding forbearance lead naturally to the use of decision tree valuation techniques due to the multiple potential outcomes and restructuring events that may arise with or without forbearance. For example, in the circumstance where forbearance is not received by the company the following factors may apply:
• The business is able to make other arrangements and is able to survive—Probability: 10 percent
- The business is then able to take advantage of certain circumstances allowing it to achieve superior profitability—Probability: 5 percent
- The business continues to struggle achieving only modest profitability—Probability: 95 percent
• The business is unable to remain solvent and pay debts as they become due, resulting in filing for bankruptcy protection—Probability: 90 percent
Contrast this to the following set of outcomes if forbearance is provided:
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