Question: BPI is a renewable energy company. It has assets whose market value in one year's time will be $ 6 0 m with a 6

BPI is a renewable energy company. It
has assets whose market value in one year's time will be $60m with a 60% probability
a 60% probability or $30m with a 40% probability. BPI has a
cost of capital of 8%. The risk-free interest rate is 4%.
a. Calculate the market value of BPI's shares if the company has
no debt?
b. In the event that BPI has to repay $30m (debt) in
in 1 year, determine the value of its shares?
c. Calculate the profitability expected by BPI's shareholders if
the company is debt-free?
d. Calculate the minimum profitability that BPI's
BPI shareholders if the company is debt-free?
e. Calculate the minimum profitability that BPI's
BPI shareholders if the company is in debt?

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