A company has a residual life of three years (that is it ends on year 3)

A company has a residual life of three years (that is it ends on year 3). Before the end of its life it will not distribute any cash flow, it will only pay one final liquidating dividend on year 3. Today the company has no project in place and can undertake one of two mutually exclusive projects -project A or B- at the same cost. Both projects have a positive NPV, both have a life of three years and for the company it is convenient to undertake one of them irrespective of its capital structure. For each project, the unlevered value of assets on year 3 will depend on the state of the economy ad is reported below: Strong economy in year 3 Weak economy in year 3 Project A 590,000 210,000 Project B 456,000 360,000 The two states of the economy (Strong or Weak) are equally likely. At the moment (today), the company also has pre-existent debt, represented by a zero-coupon bond, with maturity 3 years and face value D, where 210,000