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-1* A firm has only one project that requires an initial investment of ( $ 100,655 ). The project free cash flows in one year

image text in transcribed -1* A firm has only one project that requires an initial investment of \\( \\$ 100,655 \\). The project free cash flows in one year is either \\( \\$ 137,022 \\) or \\( \\$ 188,017 \\), with each outcome being equally likely. The project's cost of capital is \20. The risk-free interest rate is \5. a. What is the NPV of this project? What is the total asset value of this firm after this investment? What is the firm value after this investment? b. Suppose that to raise the funds for the initial investment, the project is sold to investors as an all-equity firm. The equity holders will receive the cash flows of the project in one year. How much money can be raised in this way-that is, what is the market value of the unlevered equity? What is the firm value? c. Suppose the initial \\( \\$ 100,655 \\) is instead raised by borrowing at the risk-free interest rate. What are the cash flows of the levered equity in one year, and what is its initial value according to MM? What is the firm value in this case? d. Does MMI theory hold in this case

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