Consider a project with free cash flows in one year of $132,445 or $168,043, with each outcome being equally likely. The initial investment required for the project is $100,641, and the project's cost of capital is 24%. The risk-free interest rate is 7%. The NPV of the project is $20,524 and the intitial market value of the unlevered equity is $121,165.

The cash flows of the levered equity and its initial values according to MM are:

	Date 0	Date 1	Date 1
	Initial Value	Cash Flow Strong Economy	Cash Flow Weak Economy
Debt	$100,641	?	?
Levered Equity	?	?	?