5._If interest is paid m times per year, then the per period interest rate equals the :

The predicted cash flows for the All-Mine Corporation are $4,500 in a good economy, $3,000 in an average economy, and $1,000 in a poor economy. Each economic outcome is equally likely and the promised debt repayment is $3,000. The firm is deciding whether to invest in a new project. The project would have to be financed by equity; the cost is $2,000 and will return $2,500 [that is 25%] in one year. The discount rate for both bonds and stock is 15% and the tax rate is zero.

(a) What is the value of the firm and its components before and after the project addition?

(b) Should the company take the project?Will it?