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The true values of assets in place of firms G and B are $700,000 and $500,000, respectively. The uninformed market cannot distinguish between the two
The true values of assets in place of firms G and B are $700,000 and $500,000, respectively. The uninformed market cannot distinguish between the two and prices them at the average of $600,000. Both firms have 20,000 shares outstanding. Both firms find out that they have access to a project that costs $200,000 and has an NPV of $30000. The market knows the correct cost and NPV of the project for both firms. Assume that the firms must finance the project by issuing new equity. Determine whether G and B will accept or reject the project under these circumstances
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