Consider the following risky scenarios for future cash flows for a firm: Given that the firm has
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Given that the firm has fixed debt payments of $8,000 and limited liability, which scenario will shareholders choose and why? How would your answer change if there were not limited liability?
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Project 1 Project 2 Probability Cash Flow (5) 4,000 5,000 6,000 Probability Cash Flow (S) .2 .2 5,000 2 10,000
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Related Book For
Financial Theory and Corporate Policy
ISBN: 978-0321127211
4th edition
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
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