Mrs. Vega wants to start a firm with a new project. The project requires $1000 today and it will deliver $3,000 with probability 0.75 or $0 with probability 0.25 (independently of the economy). She wants to start the firm with $500 in equity and $500 in debt. If the risk-free rate is 5%. 

How much is the firm worth?

Answer rating: 100% (QA)

To determine the firms worth we need to calculate the expected present value of the cash flows assoc... View the full answer