4. A company is analyzing an investment project. It will cost *1950 crore, and will generate annual...

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4. A company is analyzing an investment project. It will cost *1950 crore, and will generate annual cash flows of *240 crore forever. The company's cost of capital is 10 per cent. The project value will have a standard deviation of 35 per cent. Suppose that the company has rights to this project for 25 years. The current yield on 25-year government bond is 6 per cent. What is the project's DCF value? What is the value of the project as an option? Why is there a difference between these two values?

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