p12-17 . a firm has the choice of investing in one of two projects . both projects last one year . project 1 requires an investment of $ 11,000 and yields $ 11,000 with a probability of 0.5 and $ 13,000 with a probability of 0.5 . project 2 also requires an investment of $ 11,000 and yields $ 5,000 with a probability of 0.5 and $ 20,000 with a probability of 0.5 . the firm is capable of raising $ 10,000 of the investment required through a bond issue carrying an annual interest rate of 10 percent . assuming that the investors are concerned only about expected returns , which project would stockholders prefer ? why ? which project would bondholders prefer ? why ?
