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28 Sep 2019
Consider a project with free cash flows in one year of $90,000 in aweak economy or $117,000 in a strong economy, with each outcomebeing equally likely. The initial investment required for theproject is $80,000 and the projectâs cost of capital is 15%. Therisk-free interest rate is 5%.
Suppose that to raise the funds for the initial investment, theproject is sold to investors as an all-equity firm. The equityholders will receive the cash flow of the project in one year. Themarket value of the unlevered equity for this project is closestto:
(1) $94,100
(2) $90,000
(3) $86,250
(4) $98,600
Consider a project with free cash flows in one year of $90,000 in aweak economy or $117,000 in a strong economy, with each outcomebeing equally likely. The initial investment required for theproject is $80,000 and the projectâs cost of capital is 15%. Therisk-free interest rate is 5%.
Suppose that to raise the funds for the initial investment, theproject is sold to investors as an all-equity firm. The equityholders will receive the cash flow of the project in one year. Themarket value of the unlevered equity for this project is closestto:
(1) $94,100
(2) $90,000
(3) $86,250
(4) $98,600
Suppose that to raise the funds for the initial investment, theproject is sold to investors as an all-equity firm. The equityholders will receive the cash flow of the project in one year. Themarket value of the unlevered equity for this project is closestto:
(1) $94,100
(2) $90,000
(3) $86,250
(4) $98,600
Nestor RutherfordLv2
30 Sep 2019
