A firm (with face value of debt = $100) is to choose between two mutually exclusive projects: PROJECT A: LOW-RISK PROBABILITY Firm Value Stock Value Debt Value RECESSION 0.5 100 0 100 BOOM 0.5 200 100 100 PROJECT B: HIGH-RISK PROBABILITY Firm Value Stock Value Debt Value RECESSION 0.5 50 0 50 BOOM 0.5 240 140 100 Answer the following questions: a) Consider first the case where the firm is an all equity firm. Which project will the firm choose? b) With the current face value of debt = $100, which project will it implement if management is to maximize shareholders’ value? c) What is the price debt holders will pay for the debt? d) Calculate the agency cost of debt.

Josie, an unmarried taxpayer, has $155,000 in salary, $10,000 in income from a passive investment in a limited partnership, and a $26,000 passive loss from a real estate rental activity in which she actively participates. if her modified adjusted gross income is $155,000, how much of the $26,000 loss is deductible

Acompany is developing a new high­performance wax for cross country ski racing. in order to justify the price marketingwants, the wax needs to be very fast. specifically, the mean time to finish their standard test course should be less thanseconds for a former olympic champion. to test it, the champion will ski the course 8 times. the champion's times(selected at random) are 59.9 61.9 48.8 52.2 46.6 45.3 50.6 and 41.1 seconds to complete the test course. complete parts a and b below.a) should they market the wax? assume the assumptions and conditions for appropriate hypothesis testing are metfor the sample.assume=0.05. what are the null and alternative hypotheses? choose the correct answer below.b) suppose they decide not to market the wax after the test, but it turns out that the wax really does lower the champion'saverage time to less thanseconds. what kind of error have they made? explain the impact to the company of such anerror.

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