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Genworth Company is considering an investment project that generates a cash flow of $850,000 next year if the economy is favorable but generates only $320,000

Genworth Company is considering an investment project that generates a cash flow of $850,000 next year if the economy is favorable but generates only $320,000 if the economy is unfavorable. The probability of favorable economy is 60% and of unfavorable economy is 40%. The project will last only one year and be closed after that. The cost of investment is $600,000 and Genworth Company plans to finance the project with $220,000 of equity and $380,000 of debt. Assuming the discount rates of both equity and debt are 0%. What is the expected cash flow to Genworth Company's creditors if the company invests in the project?

$470,000

$380,000

$356,000

$320,000

$0

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