1. Consider a firm with no assets in place and debt outstanding with face value of $60. The firm is considering a new project. The project requires that management make ar investment of $130. Management estimates that the net cash flow will be $200 if the economy is in a boom (state B) and $160 if it is in a recession (state R). Economists predict that a boom and a recession are equally likely to occur. d. What is the point of the restriction on debtholders undertaking the project? e. Suppose debt matures after the investment decision is made. What is the maximum face value of debt resulting in zero agency costs? Consider the case of both early and later resolution of uncertainty. 1. Consider a firm with no assets in place and debt outstanding with face value of $60. The firm is considering a new project. The project requires that management make ar investment of $130. Management estimates that the net cash flow will be $200 if the economy is in a boom (state B) and $160 if it is in a recession (state R). Economists predict that a boom and a recession are equally likely to occur. d. What is the point of the restriction on debtholders undertaking the project? e. Suppose debt matures after the investment decision is made. What is the maximum face value of debt resulting in zero agency costs? Consider the case of both early and later resolution of uncertainty