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a) Two firms, ABC Ltd and XYZ Ltd, are identical in everyrespect apart from their capital structure. Both will earn $284million if the market swings upwards and $100 million in a downwardswing. There is an even chance of the market swinging upwards ordownwards. ABC Ltd has no debt. XYZ Ltd has issued $800 million ofits debt at an interest rate of 10% and hence, $80 million of itsincome is paid out as interest. Assume that investors can borrowand lend at the same rate as the corporation. The WACC of bothfirms is 16%.I) Suppose that you have $40 million to invest in XYZ Ltd shares.Is there an alternative investment in ABC Ltd that would generatethe same payoff?