Question: 1. L&D Corp. is considering two projects that each cost 200. Project X pays offer 240 next year in the good state of the economy

1. L&D Corp. is considering two projects that each cost 200. Project X pays offer 240 next year in the good state of the economy and 180 in the bad state of the economy. Project Y pays off 280 next year in the good state of the economy and 120 in the bad state of the economy. If the two states are equally likely, there are no taxes or direct bankruptcy costs, the risk-free rate of interest is zero, and investors are all risk neutral,

a. which project would equity holders prefer if the firm is 100% equity financed?

b. Which project would equity holders prefer if the firm has 170 bond/debt obligation due next year?

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