Asymmetric Information and Capital Structure Suggested time: 12 min; Points: 9. Firm Z has no debt and 100 million shares outstanding. The correct price for these shares can be either $6 or $4 per share. Investors view both possibilities as equally likely, so the shares currently trade for $5. Firm Z must raise $100 million to build a new production plant. It has two alterna- tives: Borrow the $100 million, with no consequences on firm's value (e.g., there is no tax advantage of debt or default risk). Issue equity, potentially facing a lemon's problem. (a) Suppose that if Z issues equity the share price will remain at $5. To maximize the long-term share price of the firm once its true value is known, would managers choose to issue equity or borrow the $100 if (justify your answers, explaining the benefit or loss per share of issuing equity): i. They know the correct value of the shares is $6? ii. They know the correct value of the shares is $4? (b) Given your answers in (a), what would happen to the share price if Z issues equity