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Morgan Corporation just invested in a project. In one year, this project is expected to generate cash flows of $100m if the economy is
Morgan Corporation just invested in a project. In one year, this project is expected to generate cash flows of $100m if the economy is bad (30% probability); or $450m if the economy is good (70% probability). If the company has to pay debt holders $150m in one year, what is the expected payoff to EQUITY holders in one year? Assumption: the company has little cash on the balance sheet, so the payment to debt holders will have to come entirely from the cash flows generated by the project. All numbers below are in $m. A. 135 B. 140 C. 150 D. 195 E. 210 F. 230 G. 240
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