All the remaining questions are under one long problem.

Boring Inc. works to enhance the quality of living by significantly reducing commute times in US$.$ To achieve this goal, the company plans to build a network tunnels that will effectively transform the transportation network into a three$-$dimensional space. This is a $1\%($one percent$)$ chance that it will succeed, but if it does, the return on firm$$s current assets will be phenomenal. Assume that the firm currently has assets in place that will be worth either $$1$ trillion $($good state$)$ if it succeeds or $$500$ million $($bad state$)$ if it fails in the next period. The Boring Inc. has debt outstanding with a face value of $$600$ million that must be repaid next period. The discount rate is zero and the interest rate on a risk$-$free bond is $0.$

a$.$ What is the market value of Boring's debt $($in millions$)?$

Flag question: Question $7$

Question $71$ pts

b$.$ What is the market value of Boring's equity $($in millions$)?$

Flag question: Question $8$

Question $81$ pts

Boring Inc. now decided to expend to Canada. This expansion requires an investment of $$250$ million today. This project generates $$300$ million in both good and bad state, and they can finance the project only by issuing equity.

c$.$ What is the NPV of the new project $($in millions$)?$

Flag question: Question $9$

Question $91$ pts

d$.$ What is the value of debt $($in millions$)$ today if Boring undertakes the new project?

Flag question: Question $10$

Question $101$ pts

e$.$ How much value does old shareholders lose $($in millions$)$ from the new project?