This question consists of two parts. Part 1: Paddington Industries expects EBIT of $18 million each year. Paddington's capital expenditure is expected to equal depreciation each year. There will not be change in the net working capital. Paddington's corporate tax rate is 35%, and its unlevered cost of capital is 10%. Paddington also has outstanding debt of $40 million (market value), and it expects to maintain this level of debt permanently. a) The value of Paddington Industries without leverage is $ million. (Input number only as your answer. Round it to the nearest whole number.) b) The value of Paddington Industries with leverage is $ million. (Input number only as your answer. Round it to the nearest whole number.) Part 2: XYZ is a biotechnology start-up firm. CEO of XYZ now must choose one of three R&D projects. The pay-offs (after tax) and their likelihood for each project to success in a year are shown below. The risk-free rate is 3% and market risk premium is 796. Project A is of diversifiable risk. Project B and Care of market risk. That is, the required returns are different for these projects. Project Probability of Success Payoff (in 5 million) 10096 123.6 B 5096 162 5096 0 C 1096 370 9096 20 Suppose that XYZ has debt of $150 million due at the time of the project pay-off. Which project has the highest expected pay-off for equity holders today? (Provide your answer by choosing from Project A, Project B or Project C) The highest expected pay-off for equity holders today is $ million. (Input only numbers as your answer. Round it to the nearest whole number.)