Sigma Design, a computer interface start-up firm with no tangible assets, has invested $50,000 in R&D. The success of the R&D effort as well as the state of the economy will be observed in one year. If the R&D is successful (prob. = 90%), Sigma requires a $53,000 investment to start manufacturing. If the economy is favorable

(prob. = 90%), the project is worth $153,000, and if it is unfavorable, the project will have a value of $61,000. Demonstrate how the value of Sigma is affected by whether or not it was originally financed w ith debt or equity. Assume no taxes, no direct bankruptcy costs, all investors are risk neutral, and the risk-free interest rate is zero.