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The Trekkie Fashion knows at t = 0 that it will have at t = 1 a risky investment opportunity.There are two mutually exclusive projects, A and B, each requiring a $105 investment.If A is undertaken at t = 1, it will generate $160 with probability 0.8 and zero with probability 0.2 at t= 2.If B is undertaken, it will generate $165 with probability 0.6 and zero with probability 0.4 at t = 2.The firm approaches your bank for a $105 loan.Your bank cannot observe the firm's project choice.The riskless single-period interest rate is 8% at t = 0.At t = 0, it is not known what the riskless interest rate at t = 1 will be, but it is common knowledge that this rate can be 4% or 12% with equal probability.The projects are the only assets the firm has, and everybody is risk-neutral.The Trekkie Fashion has two choices: it can wait until t = 1 and borrow in the spot market, or it can purchase a loan commitment from your bank at t = 0 for a predetermined term at t = 1.The loan market is competitive.
-Suppose that the interest at t = 1 is 4% and you assume that B will be chosen, what is the firm' NPV if A is chosen instead?

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Use the following information for questions 
The Trekkie Fashion knows at t = 0 that it will have at t = 1 a risky investment opportunity.There are two mutually exclusive projects, A and B, each requiring a $105 investment.If A is undertaken at t = 1, it will generate $160 with probability 0.8 and zero with probability 0.2 at t= 2.If B is undertaken, it will generate $165 with probability 0.6 and zero with probability 0.4 at t = 2.The firm approaches your bank for a $105 loan.Your bank cannot observe the firm's project choice.The riskless single-period interest rate is 8% at t = 0.At t = 0, it is not known what the riskless interest rate at t = 1 will be, but it is common knowledge that this rate can be 4% or 12% with equal probability.The projects are the only assets the firm has, and everybody is risk-neutral.The Trekkie Fashion has two choices: it can wait until t = 1 and borrow in the spot market, or it can purchase a loan commitment from your bank at t = 0 for a predetermined term at t = 1.The loan market is competitive.
-Suppose that the interest at t = 1 is 4% and you assume that B will be chosen, what is the firm' NPV if A is chosen instead?

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The Answer of Use the following information for questions 
The Trekkie Fashion knows at t = 0 that it will have at t = 1 a risky investment opportunity.There are two mutually exclusive projects, A and B, each requiring a $105 investment.If A is undertaken at t = 1, it will generate $160 with probability 0.8 and zero with probability 0.2 at t= 2.If B is undertaken, it will generate $165 with probability 0.6 and zero with probability 0.4 at t = 2.The firm approaches your bank for a $105 loan.Your bank cannot observe the firm's project choice.The riskless single-period interest rate is 8% at t = 0.At t = 0, it is not known what the riskless interest rate at t = 1 will be, but it is common knowledge that this rate can be 4% or 12% with equal probability.The projects are the only assets the firm has, and everybody is risk-neutral.The Trekkie Fashion has two choices: it can wait until t = 1 and borrow in the spot market, or it can purchase a loan commitment from your bank at t = 0 for a predetermined term at t = 1.The loan market is competitive.
-Suppose that the interest at t = 1 is 4% and you assume that B will be chosen, what is the firm' NPV if A is chosen instead?

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