Hi Grade Regulator Company (see Problem 3) expects the EBIT level after the expansion program to be $1 million, with a two-thirds probability that it will be between $600,000 and $1,400,000.

a. Which financing alternative do you prefer? Why?

b. Suppose the expected EBIT level were $1.5 million and there were a two-thirds probability that it would be between $1.3 million and $1.7 million. Which financing alternative would you prefer? Why?