Firm A and firm B have different capital structures but are otherwise identical. Firm A has 0 debt; firm B is financed with debt, and the sum of interest and principal repayments on its debt is $20. The shareholders of each firm vote about which one of two different investment projects to implement. Project A yields a CF of $200 in a boom and $0 in a recession; Project B yields a CF of $120 in a boom and $110 in a recession. Both boom and recession are equally likely. You own shares in both firms and cast your vote to maximize expected cashflows to shareholders.

Which projects would you pick for each firm? Which projects would you pick if the sum of interest and principal repayments on firm Bs debt was instead $40?