Re posting this question. It was not fully answered. Please make sure you answer 1b and 1c

Suppose there are no taxes. Firm ABC has nodebt, and firm XYZ has debt of $6,000 on which it pays interest of 10 %

each year. Both companies have identical projects that generate free cash flows of $6,200 or $6,300 each year. After paying any interest ondebt, both companies use all remaining free cash flows to pay dividends each year.

a.In the tablebelow, fill in the debt payments for each firm and the dividend payments the equity holders of each firm will receive given each of the two possible levels of free cash flows.

b.Suppose you hold 10 %of the equity of ABC. What is another portfolio you could hold that would provide the same cashflows?

c.Suppose you hold 10% of the equity of XYZ.

If you can borrow at 10 %, what is an alternative strategy that would provide the same cashflows?

a.In the tablebelow, fill in the debt payments for each firm and the dividend payments the equity holders of each firm will receive given each of the two possible levels of free cash flows. (Round all answers to the nearestdollar.)

ABC XYZ

FCF Debt Payments Equity Dividends Debt Payments Equity Dividend

6,200 ____________ ___________ ___________ _________

$6,300 ____________ ___________ ___________ _________

1b.If you hold 10 %of the equity ofABC, another portfolio you could hold that would provide the same cash flows wouldbe: (nearestinteger.)

Would you Sell or Buy ___% of XYZ or ABC debt, and Buy or Sell ___% of XYZ or ABC equity.

1c.If you hold 10 % of the equity of XYZ and can borrow at the same terms asXYZ, an alternative strategy that would provide the same cash flows wouldbe:(round to the nearestinteger.)

Lend or Borrow an amount equal to ___% of ABC or XYZ debt and Buy or Sell ___% of ABC or XYZ equity