Question: ABC wants to acquire a $1.1 million machine. The machine does not depreciate and can be sold for $1.1 million at the end of the

ABC wants to acquire a $1.1 million machine. The machine does

ABC wants to acquire a $1.1 million machine. The machine does not depreciate and can be sold for $1.1 million at the end of the year. rf=10% With the machine, ABC can invest in a project that will yield $550000 with certainty. ABC can cut its dividends to buy the machine or lease the machine. If ABC has no chance of default, which option should it choose? What if there is a 30% risk-neutral probability that ABC will be bankrupt and its equity wiped out

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