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Company X stockholders will decide on choosing one of the two following projects. Initial Cost Cashflow in Boom (50% probability) Cashflow in Bust (50%

Company X stockholders will decide on choosing one of the two following projects. Initial Cost Cashflow in Boom (50% probability) Cashflow in Bust (50% probability) Project A Project B 1 If the Project initial cost, C, is $20 which is financed by debt, which project will be chosen by stockholders? 2 If the Project initial cost, C, is $100 which is financed by debt, which project will be chosen by stockholders? $130 $90 $190 $10

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