Q6.39. A new project has the following success prob- abilities: Assume risk neutrality. If a bond with

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Q6.39. A new project has the following success prob- abilities:

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Assume risk neutrality. If a bond with $100 face value collateralized by this project promises an interest rate of 8%, then what is the prevailing cost of capital, and what do shareholders receive if the buyout materializes?

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