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A firm has $10 in cash and borrows $90 at 10%. The CEO is considering investing in a project that costs $100 and has a

A firm has $10 in cash and borrows $90 at 10%. The CEO is considering investing in a project that costs $100 and has a 50/50 chance of paying $80 or $120.

What is the expected payoff to the debt under limited liability?

What is the expected payoff to the equity under limited liability?

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