value of assets, debt, and equity where the amounts are calculated based on the good state, the bad state, and on expected values. Base case market value balance sheet in the good state (50% chance) Base case market value balance sheet in the bad state ( 50% chance) Base case market value balance sheet based on expected values the good state and a $8 cash flow In the bad state. What is the expected value of the firm's debt if the firm decides to accept Project B