ATC Has a Value of $70,000 in a Good Economy

Multiple Choice

ATC has a value of $70,000 in a good economy and $55,000 in a recession.The firm has $60,000 of debt.The probability of a recession is 50 percent.The firm is considering a project that would change the firm values to $73,000 in a good economy and $50,000 in a recession.If the firm accepts this project,the firm value will ______ and shareholder value will ______.

A) decrease by $1,000;decrease by $1,000
B) decrease by $2,000;decrease by $2,000
C) decrease by $1,000;increase by $1,500
D) increase by $1,500;increase by $1,500
E) increase by $1,500;decrease by $1,000