Use the Following Information for Questions

Multiple Choice

Use the following information for questions
Consider a firm with $100 retained earnings.It has risky debt outstanding which requires a payment of $100 one period hence.The firm has a risky project which requires an investment of $50 today.If the project is undertaken, the shareholders get a liquidating dividend of $50 today.The state of nature one period hence is either High H or Low L with equal probability.If no investment is made today, the firm has a total value of $120 in state H or $80 in state L.If the investment is made, the firm's total value is $250 in state H or $10 in state L.Assume a discount rate of zero.
-To maximize the shareholders' wealth, the firm should

A) Reject the project since it has a value = -$40 to the shareholders
B) Reject the project since it has a value = -$15 to the shareholders
C) Accept the project since it has a value = $110 to the shareholders
D) Accept the project since it has a value = $125 to the shareholders
E) Indifferent since the project has a zero net present value