Consider a firm, Johnson Supplies, that can invest $100 at the start of the period ( t = 0) in a project that will pay off at the end of the period ( t = 1) $400 if successful (state S₁) and zero if unsuccessful (state S₂). State S₁ occurs with probability 0.7. The initial $100 financing comes from unsecured debt issued at t = 0. Before the end of the period, but after the initial financing is raised, the firm will have an opportunity to purchase an asset (call it A) for $100. This asset will surely be worth $120 at t = 1. Assume that Johnson cannot be forced to purchase this asset. Compute Johnson’s optimal financing strategy. Assume that everybody is risk neutral and that the riskless interest rate is 10%.