Suppose there are no taxes. Firm ABC has no debt, and firm $xYZ$ has debt of $$6,000$ on

which it pays interest of $10\%$ each year. Both companies have identical projects that

generate free cash flows of $$800$ or $$1,200$ each year. After paying any interest on debt, both

companies use all remaining free cash flows to pay dividends each year.

a$.$ In the table below, fill in the debt payments and equity dividends each firm will receive

given each of the two possible levels of free cash flows.

b$.$ Suppose you hold $10\%$ of the equity of ABC. What is another portfolio you could hold that

would provide the same cash flows?

c$.$ Suppose you hold $10\%$ of the equity of $xYZ.$ If you can borrow at $10\%,$ what is an

alternative strategy that would provide the same cash flows?

a$.$ In the table below, fill in the payments debt and equity holders of each firm will receive

given each of the two possible levels of free cash flows. $($Round to the nearest dollar.$)$

b$.$ Suppose you hold $10\%$ of the equity of ABC. What is another portfolio you could hold that

would provide the same cash flow? $($Select from the drop$-$down menus and round to the

nearest integer.$)$

$\%of$ debt, and

$\%of$ equity.

c$.$ Suppose you hold $10\%$ of the equity of $xYZ.$ If you can borrow at $10\%,$ what is an

alternative strategy that would provide the same cash flow? $($Select from the drop$-$down

menus and round to the nearest integer.$)$

$\%$ of

debt, and

$\%$ of

equity.