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.. (5 points) The All-Mine Corporation is considering whether to invest in two mutually exclusive projects. Both projects cost $100,000. Project A will generate expected

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.. (5 points) The All-Mine Corporation is considering whether to invest in two mutually exclusive projects. Both projects cost $100,000. Project A will generate expected cash flow $250,000 in good economy, and $2,500 in bad economy. Project B will generate expected cash flow $300,000 in good economy, but loss $300,000 in bad economy. Each economic outcome is equally likely. a) If All-Mine is an all-equity firm, which project should the company choose? What is the incremental value with Project A or B respectively? (2 points) b) If All-Mine can borrow debt of $50,000 to support its investment, which project should the company choose? What is the incremental value with Project A or B for shareholders respectively? (2 points) c) Discuss why the presence of debt affects firm's investment choice (1 point)

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