Consider the equity issuance problem discussed in the final two slides of chapter 4, in the pecking order part. We showed that if the probability p of the good outcome (the outcome in which assets in place are worth $150M and the new project pays $120M) is p = 50%, incumbents who receive good news choose not to issue new equity and not to invest. Above what value of p does there exist an equilibrium in which incumbents are willing to invest in the new project no matter what news they receive?

Problem 7 (12 pts) Consider the equity issuance problem discussed in the final two slides of chapter 4, in the pecking order part. We showed that if the probability p of the good outcome (the outcome in which assets in place are worth $150M and the new project pays $120M) is p = 50%, incumbents who receive good news choose not to issue new equity and not to invest. Above what value of p does there exist an equilibrium in which incumbents are willing to invest in the new project no matter what news they receive? Problem 7 (12 pts) Consider the equity issuance problem discussed in the final two slides of chapter 4, in the pecking order part. We showed that if the probability p of the good outcome (the outcome in which assets in place are worth $150M and the new project pays $120M) is p = 50%, incumbents who receive good news choose not to issue new equity and not to invest. Above what value of p does there exist an equilibrium in which incumbents are willing to invest in the new project no matter what news they receive