1. Using the Modigliani-Miller (MM) theory in a perfect market, you want to evaluate whether to invest in a project and how to finance the project. The project has free cash flows in one year of $900 in a weak economy or $1400 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $800, and the project's cost of capital is 15%. The risk-free interest rate is 5%. Suppose that to raise the funds for the initial investment, the project is sold to investors as an all-equity firm. For the net present value (NPV) and the market value of the unlevered equity of this project, which of the following options is correct?

   	A.	The NPV of the project is $200 and the market value of the unlevered equity is $1,000
   	B.	The NPV of the project is $200 and the market value of the unlevered equity is $1,150
   	C.	The NPV of the project is $300 and the market value of the unlevered equity is $1,000
   	D.	The NPV of the project is $300 and the market value of the unlevered equity is $1,150