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3.16 Consider the following risky scenarios for future cash flows for a firm: Project 1 Project 2 Probability Cash Flow ($) Probability Cash Flow ($)
3.16 Consider the following risky scenarios for future cash flows for a firm: Project 1 Project 2 Probability Cash Flow ($) Probability Cash Flow ($) .2 .6 .2 4,000 5,000 6,000 .4 .2 .4 0 5,000 10,000 Given that the firm has fixed debt payments of $8,000 and limited liability, which scenario will shareholders choose and why? How would your answer change if there were not limited liability? 
3.16 Consider the following risky scenarios for future cash flows for a firm: Given that the firm has fixed debt payments of $8,000 and limited liability, which scenario will shareholders choose and why? How would your answer change if there were not limited liability
3.16 Consider the following risky scenarios for future cash flows for a firm: Project 1 Project 2 Probability Cash Flow ($) Probability Cash Flow ($) .2 .6 .2 4,000 5,000 6,000 .4 .2 .4 0 5,000 10,000 Given that the firm has fixed debt payments of $8,000 and limited liability, which scenario will shareholders choose and why? How would your answer change if there were not limited liability?
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