A firm has debt with a face value of 50 and has assets in place that will generate 20 in the bad state and 100 in the good state. The firm is able to take on a project in the first period that costs 10 and will generate the payoffs according to the following table: Assume that to finance the new project, the firm can only offer a senior debt with face value of 10.

	b (pr=.5)	g (pr=.5)
Existing Project	20	100
New Project	0	18

1. What is the projects NPV? (assume 0% discount rate) 2. (i) What is the shareholders payoff if the firm does not undertake the new project? (ii) What is the debt holders payoff if the firm does not undertake the new project? 3. (i) What is the shareholders payoff if the firm does undertake the new project? (ii) What is the debt holders payoff if the firm does undertake the new project? 4. Should the firm undertake the project? Will the manager, operating on behalf of the shareholders, take the project?