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Q7 VA Incorporated is in ready to launch a new product. Depending upon the success of this product, VA will have a value of either $100 million, $150 million, or $191 million, with each outcome being equally likely. The cash flows are unrelated to the state of the economy (i.e. risk from the project is diversifiable) so that the project has a beta of 0 and a cost of capital equal to the risk-free rate, which is currently 5%. Assume that the capital markets are perfect. 1. Determine the initial value of VA's equity without leverage. (5 pts.) 2. Suppose that VA has zero-coupon debt with a $125 million face value due next year. Deter- mine the initial value of VA's debt. (5 pts.) 3. Suppose that VA has zero-coupon debt with a $125 million face value due next year. Deter- mine the initial value of VA's equity. (10 pts.) 4. Determine the value of the levered firm. (5 pts.) Q7 VA Incorporated is in ready to launch a new product. Depending upon the success of this product, VA will have a value of either $100 million, $150 million, or $191 million, with each outcome being equally likely. The cash flows are unrelated to the state of the economy (i.e. risk from the project is diversifiable) so that the project has a beta of 0 and a cost of capital equal to the risk-free rate, which is currently 5%. Assume that the capital markets are perfect. 1. Determine the initial value of VA's equity without leverage. (5 pts.) 2. Suppose that VA has zero-coupon debt with a $125 million face value due next year. Deter- mine the initial value of VA's debt. (5 pts.) 3. Suppose that VA has zero-coupon debt with a $125 million face value due next year. Deter- mine the initial value of VA's equity. (10 pts.) 4. Determine the value of the levered firm. (5 pts.)