The following question is from Corporate Finance 11th Edition-Chpt 17 Mini-Case Study page 553 McKenzie Corporation questions. I WILL NEED TO SHOW CALCULATION AS WELL. Thank you!

McKenzie CORPORATIONS CAPITAL BUDGETING (Case Study):

Sam McKenzie is the founder and CEO of McKenzie Restaurants, Inc., a regional company. Sam is considering opening several new restaurants. Sally Thornton, the companys CFO, has been put in charge of the capital budgeting analysis. She has examined the potential for the companys expansion and determined that the success of the new restaurants will depend critically on the state of the economy over the next few years. McKenzie currently has a bond issue outstanding with a face value of $25 million that is due in one year. Covenants associated with this bond issue prohibit the issuance of any additional debt. This restriction means that the expansion will be entirely financed with equity at a cost of $5.7 million. Sally has summarized her analysis in the following table, which shows the value of the company in each state of the economy next year, both with and without expansion:

Economic Growth Probability Without Expansion With Expansion

Low .30 $20,000,000 $22,000,000

Normal .50 $25,000,000 $32,000,000

High .20 $43,000,000 $52,000,000

3. One year from now, how much value creation is expected from the expansion? How much value is expected from stockholders? Bondholders?