The possible payoffs from Ms. Ketchup’s projects (see Section 18.3) have not changed,but there is now a 40 percent chance that project 2 will pay off $24 and a 60 percent,chance that it will pay off $0.,a. Recalculate the expected payoffs to the bank and Ms. Ketchup if the bank lends the,present value of $10. Which project would Ms. Ketchup undertake?,b. What is the maximum amount the bank could lend that would induce Ms. Ketchup,to take project 1?
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