Consider a project with a free cash flows in one year of 149,546or 179,003, with each of outcome being equally likely, the initialinvestment required for the project is 93,227 and the project'scost of capital is 17%, the risk-free interest rate is 7%. e fundsf
A) What is the NVP of this project
B) Suppose that to raise the funds for the initial investmentthe project is sold to investors as an all-equity firm. The equityholders will receive the cash flows of the project in one year. Howmuch money can be raised in this way-that is the initial marketvalue of the unlevered equity,
C) Suppose the initial 93,227 is instead raised by borrowing atthe risk-free interest rate. What are the cash flows of the leveredequity, what is its initial value and what is the equity accordingto MM.
Debt Initial value cash flow Strong Economy
93,227 cash flow weak economy
levered equity
Consider a project with a free cash flows in one year of 149,546or 179,003, with each of outcome being equally likely, the initialinvestment required for the project is 93,227 and the project'scost of capital is 17%, the risk-free interest rate is 7%. e fundsf
A) What is the NVP of this project
B) Suppose that to raise the funds for the initial investmentthe project is sold to investors as an all-equity firm. The equityholders will receive the cash flows of the project in one year. Howmuch money can be raised in this way-that is the initial marketvalue of the unlevered equity,
C) Suppose the initial 93,227 is instead raised by borrowing atthe risk-free interest rate. What are the cash flows of the leveredequity, what is its initial value and what is the equity accordingto MM.
Debt Initial value cash flow Strong Economy
93,227 cash flow weak economy
levered equity
