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QUESTION 12 Company XYZ has currently 1 million dollars in cash and total debt due next year of around 3 million. The company expects zero
QUESTION 12 Company XYZ has currently 1 million dollars in cash and total debt due next year of around 3 million. The company expects zero profits next year unless it invests the 1 million dollars currently on the bank account in a new risky project. If implemented, this project will generate a payoff of 4 million dollars with a 20 percent probability, and nothing otherwise. Assume no discount rate. Which of the following statements is correct? O The investment is profitable for both debtholders and shareholders The investment is profitable for debtholders and unprofitable for shareholders The investment is unprofitable for debtholders and profitable for shareholders The investment is unprofitable for both debtholders and shareholders QUESTION 13
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