The ABC company is in financial distress, has USD10,000 in cash, and debt with face value USD50,000 due next year. The ABC company has the possibility to invest in a project which requires an investment of all of its USD 10,000 cash and is expected to produce a cash flow next year of USD100,000 with probability 5 percent, and USD 10,000 otherwise. Assume a discount rate of 20 percent throughout. 

By implementing the project versus doing nothing, by how much does shareholder value increase?

Answer rating: 100% (QA)

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