Homework answers / question archive / A firm has $10 in cash and borrows $90 at 10%

A firm has $10 in cash and borrows $90 at 10%

Finance

Share With

A firm has $10 in cash and borrows $90 at 10%. The CEO is considering investing in a project that costs $100 and has a 50/50 chance of paying $80 or $120. What is the expected payoff to the debt under limited liability? 
What is the expected payoff to the equity under limited liability?