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Firm XYZ Inc . is considering to choose one project from the following two: a low risk project or a high risk one. The company

Firm XYZ Inc . is considering to choose one project from the following two: a low risk project or a high risk one.

The company has $2,800 debt .

The probability of good and bad economy state is 60%, and 40%. (NOT 50%!!) .

Below is forcasted firm value under two economies:

Firm value Firm value
Economy Prob. Low Risk Project High Risk Project
Bad 40% $ 2,600 $ 2,400
Good 60% $ 3,600 $ 4,400

Based on predicted firm value under the bad and good economy, please calculate:

( note: firm's value equals to a summation of prob. * predicted value under each economy)

. Expected firm value if firm adopts the HIGH risk project.

( Format and round to whole number, NO decimals,no "," , for example: 12500)

. Expected equity value if firm adopts the HIGH risk project.

( Format and round to whole number, NO decimals,no "," , for example: 12500)

. Expected debt value if firm adopts the HIGH risk project.

( Format and round to whole number, NO decimals,no "," , for example: 12500)

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