Everyone is risk-neutral and the risk-free rate is 5%. There is no corporate tax. Fgenerates a single EBIT (=cash-flow) in one year. It is equal to 2,000 or 500 with equal probability. F has existing debt, face value 1,000, coupon 15%. F can implement a new project P, that generates a certain cash-flow of 300 in one year and costs 200. You can assume that the interest rate of risk-free debt is the risk-free rate. 1. F contemplates raising $200 by issuing junior debt (i.e., new debt is junior to existing debt) with face value $200 and maturity one year. What would be the interest i? 2. Following on question 1, what is the value of equity of the firm if P is implemented? Are F's stockholders willing to implement P in that case? 3. F contemplates raising $200 by issuing senior debt (i.e., new debt is senior to existing debt) with face value $200 and maturity one year. What is the value of equity of the P is implemented? Are F's stockholders willing to implement P in that case? Salact 5 correct vara Everyone is risk-neutral and the risk-free rate is 5%. There is no corporate tax. Fgenerates a single EBIT (=cash-flow) in one year. It is equal to 2,000 or 500 with equal probability. F has existing debt, face value 1,000, coupon 15%. F can implement a new project P, that generates a certain cash-flow of 300 in one year and costs 200. You can assume that the interest rate of risk-free debt is the risk-free rate. 1. F contemplates raising $200 by issuing junior debt (i.e., new debt is junior to existing debt) with face value $200 and maturity one year. What would be the interest i? 2. Following on question 1, what is the value of equity of the firm if P is implemented? Are F's stockholders willing to implement P in that case? 3. F contemplates raising $200 by issuing senior debt (i.e., new debt is senior to existing debt) with face value $200 and maturity one year. What is the value of equity of the P is implemented? Are F's stockholders willing to implement P in that case? Salact 5 correct vara