$**$Agency problem between equity holder and bondholder$**$

Bond of $$20$ million to be repaid in one year.

Asset value when repaying bonds is $$15$ million.

Currently has $$2$ million in cash.

Starting a project now with $$2$ million will yield an NPV of $4$ in one year.

Calculate the value of bonds and equity for each choice and determine if the manager should undertake the positive NPV project.