Question: A firm is worth $50 or $180 with equal probability and is financed with debt that has a face value of $60. The cost of

A firm is worth $50 or $180 with equal probability and

A firm is worth $50 or $180 with equal probability and is financed with debt that has a face value of $60. The cost of capital for all securities is 11%. If the firm issues new debt with a face value of $50 that has the same priority as the $60 debt being sold today, by how much will the equity holders wealth increase or decrease? 22 increase $10.24 increase $10.15 increase $8.19 decrease $9.83 A B C D

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