Assume that today your firm issues debt with face value of $40 to be repaid next year (exactly when the project itself pays). What is the PV of each projects Equity?

(Information is relevant to questions 19-20) You own an all-equity firm that today can take one the following two mutually exclusive projects. The projects do not require initial investment and generate this payoff table next year (use 0% discount rate): Probability Project A Project B Bad state Good state 1/2 1/2 $60 $120 SO $150 19. What is the PV of each project? (a) Project A's PV = $75; Project Bs PV = $150 (b) Project A's PV = $80; Project B's PV = $80 (c) Project A's PV = $90; Project Bs PV = $75 (d) Project A's PV = $150; Project B's PV = $60 (e) Project A's PV = $150; Project B's PV = $0 Assume that today your firm issues debt with face value of $40 to be repaid next year (exactly when the project itself pays). 20. What is the PV of each project's Equity? (a) Project A's Equity PV = $50; Project Bs Equity PV = $50 (b) Project A's Equity PV = $50; Project Bs Equity PV = $55 (c) Project A's Equity PV = $90; Project Bs Equity PV = $75 (d) Project As Equity PV = $40; Project Bs Equity PV = $20 (e) Project A's Equity PV = $50; Project B's Equity PV = $20