Consider a project with free cash flow in one year of $141,211 or $193,028, with either outcome being equally likely. The initial investment required for the project is $100,000, and the project's cost of capital is 16%. The risk-free interest rate is 3%. (Assume no taxes or distress costs.)

c. Suppose the initial $100,000 is instead raised by borrowing at the risk-free interest rate. What are the cash flows of the levered equity, and what is its initial value according to M&M?

Date 0	Date 1
	Initial Value	Cash Flow Strong Economy	Cash Flow Weak Economy
Debt	$100,000	__________	__________
Levered Equity	$44068.53	__________	___________