Consider a firm whose only asset is a plot of vacant land, and whose only liability is - 2 - debt of $15 million due in one year. If left vacant, the land will be worth $10.1 million in one year. Alternatively, the firm can develop the land at an upfront cost of $19.6 million. The developed land will be worth $34.3 million in one year. Suppose the risk-free interest rate is 9.9%, assume all cash flows are risk-free, and assume there are no taxes. a. Calculate the NPV of developing the land. (2 mark) b. Suppose the firm plans to raise $19.6 million from equity holders and develop the land. Calculate the value of the firm's equity and debt today. (4 marks) c. Equity holders may not be willing to financing the development project. Explain the reason and discuss the implication of this outcome for general capital structure decisions. (4 marks)