Question: rE 14.2. Consider a single period binomial setting where the riskless interest rate is zero, and there are no taxes. A firm consists of a

rE 14.2. Consider a single period binomial setting where the riskless interest rate is zero, and there are no taxes. A firm consists of a machine that will produce cash flows of $210 if the economy is good and $80 if the economy is bad. The good and bad states occur with equal risk-neutral probability.

Initially, the firm has 100 shares outstanding and debt with a face value of $50 due at the end of the period. What is the share price of the firm?

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