Assume two companies, each with only one asset that will mature in one year for a cash value

of $$500.$ That asset $($or any part of it$)$ can be exchanged for cash at present value, using $10\%$

discount rate. That is the companies can cash in enough of the asset to provide for any required

project investment. Company $A$ is all equity financed and $B$ has debt with par value of $$400$ to

be paid in exactly one year $($no interest, only par$).$ Both companies are presented with a new

project. The project will require a $$300$ investment and will have one payoff in one year. The

payoff is $$1,000$ with $25\%$ probability and zero otherwise. Assume risk adjusted discount rate is

$10\%.$

a$.$ Will company A take the project?

b$.$ Will company B take the project? What is the project NPV to B$\text{'}$s shareholders?