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Use the following information for the next 6 questions: Fountain Corporation's economists estimate that a good business environment and a bad business environment are equally
Use the following information for the next 6 questions: Fountain Corporation's economists estimate that a good business environment and a bad business environment are equally likely for the coming year. The managers of the company must choose between two mutually exclusive projects. Assume that the project the company chooses will be the company's only activity and that the company will close one year from today. The company is obligated to make a $4,200 payment to bondholders at the end of the year. The projects have the same systematic risk but different volatility. Consider the following information pertaining to the two projects: Economy Probability Low- Volatility Project Payoff $4,200 4,750 High- Volatility Project Payoff $3,600 5,350 Bad Good .50 Question 18 0.75 pts What is the expected value of the company's equity if the low-volatility project is undertaken? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Question 19 0.75 pts What is the expected value of the company's equity if the high-volatility project is undertaken? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)
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