XYZ's assets-in-place are subject to idiosyncratic risk: Assets Value from the perspective of Outside Shareholders 150 Manager of XYZ P 0.5 = 0.5 150 p=1 It has the opportunity to invest in a new project: Investment outlay is $F. Safe return next year is $22. Discount rate is 10%. (In class we analyzed the case with D = 50 and F-12). 1) Assume D-50, F=18. What is the value of the company and the equity if the company has the $18 necessary to undertake the project? What will the manager do? What is the equity value of the existing shareholders (represented by the manager), if the company has to use external equity to finance the project? What will the manager do? a. b