Burger Queen Has a Value of $26,000 in a Good

Multiple Choice

Burger Queen has a value of $26,000 in a good economy and $17,000 in a recession.The firm has $20,000 of debt.The probability of a recession is 50 percent.The firm is considering a project that would change the firm values to $27,000 in a good economy and $15,000 in a recession.Will shareholders be willing to accept this project? Why or why not?

A) No;Because the project will lower firm value by $500
B) No;Because the project will lower shareholder value by $500
C) No;Because the firm will be worth less in a recession than it is currently
D) Yes;Because the project will increase both firm and shareholder value by $500
E) Yes;Because shareholder value will increase $500 at a cost of $1,000 to the bondholders