Firm Y has no debt and 100 million shares outstanding. The correct price for these shares can be either $43 or $37 per share. Investors view both possibilities as equally likely, so the shares currently trade for $40. Firm Y must raise $200 million to build a new production plant. It has two alternatives: Borrow the $200 million, with no consequences on firm's value (e.g., there is not tax advantage of debt or default risk). Issue equity, potentially facing a lemon's problem. (a) Suppose that if Y issues equity the share price will remain at $40. To maximize the long-term share price of the firm once its true value is known, would managers choose to issue equity or borrow the $200 million if (justify your answers, explaining the benefit or loss per share of issuing equity): i. They know the correct value of the shares is $37? ii. They know the correct value of the shares is $43? (b) Given your answers in (a), what would happen to the share price if Y issues equity? Firm Y has no debt and 100 million shares outstanding. The correct price for these shares can be either $43 or $37 per share. Investors view both possibilities as equally likely, so the shares currently trade for $40. Firm Y must raise $200 million to build a new production plant. It has two alternatives: Borrow the $200 million, with no consequences on firm's value (e.g., there is not tax advantage of debt or default risk). Issue equity, potentially facing a lemon's problem. (a) Suppose that if Y issues equity the share price will remain at $40. To maximize the long-term share price of the firm once its true value is known, would managers choose to issue equity or borrow the $200 million if (justify your answers, explaining the benefit or loss per share of issuing equity): i. They know the correct value of the shares is $37? ii. They know the correct value of the shares is $43? (b) Given your answers in (a), what would happen to the share price if Y issues equity