Fountain Corporations economists estimate that a good business environment and a bad business environment are equally likely for the coming year. The managers of Fountain must choose between two mutually exclusive projects. Assume that the project Fountain chooses will be the firms only activity and that the firm will close one year from today. Fountain is obligated to make a $3,500 payment to bondholders at the end of the year. The projects have the same systematic risk but different volatilities. Consider the following information pertaining to the two projects:

Economy	Probability	Low-Volatility Project Payoff	High-Volatility Project Payoff
Bad	0.50	$3,500	$2,900
Good	0.50	$3,700	$4,300

Suppose bondholders rationally assume that because management is motivated with equity-based compensation, they will choose to maximize equity value rather than total firm value. What payment must bondholders require of stockholders in order to make stockholders indifferent between the two projects?

A. $4,000

B. None of these values are correct

C. $3,600

D. $3,800