Money Invested Today

Market Conditions One Year From Now

Expected Value

Expected Return

GOODBAD Cash flow to firm Bondholders' Stockholders' Project cost Bondholder Shareholder Bond Interest Rate Good Probability Bad Probability

Lets assume that we have project L, which has a 40% chance of turning out good. The company Raises $7,000, 50% from bondholders demanding a 6% interest rate and 50% from stockholders, which becomes $9,500 at the end of the project in the good situation or $4,500 in the bad. Excess proceeds from the project are invested back into the company or paid out to shareholders in dividends. Complete the table above given this information. Complete the table so that it could calculate the expected value and return no matter what inputs were given (hint: you need to use conditional statements or "if" functions).