Question: A firm is worth $75 or $210 with equal probability and is financed with debt that has a face value of $80. It is considering

A firm is worth $75 or $210 with equal probability and is financed with debt that has a face value of $80. It is considering a new project that is equally likely to be worth -$50 or +$55. The cost of capital is 12% for all securities. 


Calculate the present values of the firmʹs debt and equity if the project is undertaken.

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