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Bedrock Company has $ 7 0 million in debt and $ 3 0 million in equity. The debt matures in one - year and has
Bedrock Company has $ million in debt and $ million in equity. The debt matures in oneyear and
has a interest rate, so the company is promising to pay back $ million to its debtholders oneyear
from now. The company is considering two possible investments, each of which will require an upfront
cost of $ million. Each investment will last for oneyear, and the payoff from each investment
depends on the strength of the overall economy. There is chance that the economy will be weak
and a chance it will be strong.
Here are the expected payoffs all dollars are in millions from the two investments:
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