Sheaves Corporation economists estimate that a good business environment and a bad business environment are equally likely for the coming year. The managers of Sheaves must choose between two mutually exclusive projects.

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Sheaves Corporation Economists Estimate that a good business environment and a bad business* Environment are equally likely for the coming year . The managers of Sheaves must choose between two mutually exclusive projects . Assume that the project Sheaves chooses will be the firm's only activity and that the firm will close one year from today . Sheaves is obligated to make a ]]. END payment to bondholders at the End of the year . The projects have the same systematic risk , but different volatilities . Consider the following information pertaining to the two projects .\\ Economy Probability\\ Low - Volatility High - Volatility* Project Payoff 53. 800 Froject Payoff Ead 53, 200 15 Good 4. 150 4. TED a . What is the expected value of the firm if the low - volatility project is undertaken?" What if the high - volatility project is undertaken ?" I Do not round intermediate calculations and round your answers to the nearest whole dollar amount ( e . g., 321 . 1 ExpectEd value of the firm Low - volatility project value High - volatility project value* 6. What is the expected value of the firm's Equity if the Low - volatility project is undertaken ? What is it if the high - volatility project is undertaken ? IDO not round intermediate calculations and round your answers to the nearest whole dollar amount ( & . ` .. 321. 1 Expected value of the firm's equity Low - volatility project value* High - volatility project value* C. Which project would the firm's stockholders prefer? O Low- volatility project O High - volatility project d. Suppose bondholders are fully aware that stockholders might choose to maximize Equity value rather than total firm value and opt for the high-volatility project . TO minimize this agency cost , the firm's bondholders decide to use a band covenant to stipulate that the bondholders can demand a higher* payment if the firm chooses to take on the high- volatility project . What payment to bondholders would make stockholders indifferent between the two projects ?" I DO not round intermediate calculations and round your answers to the nearest whole dollar amount ( E . J ., 321. 1 Payment to bondholders