Debtholders and shareholders

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Reference no: EM1343406

Debtholders and Shareholders

Scenario: Project A has a guaranteed a payoff of $200 million, which will exactly compensate the debtholders of the firm. Project B has a 50 percent probability of a $400 million payoff and a 50 percent probability of a zero payoff. Which project do the debtholders prefer and which project do the shareholders prefer?

Reference no: EM1343406

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