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A company exists for one more year and has existing assets with cash flows in one year distributed as follows: 12 Probability 50% 50% Cashflows
A company exists for one more year and has existing assets with cash flows in one year distributed as follows: 12 Probability 50% 50% Cashflows 120 40 The company has outstanding interest and principal of 70 that will be due in one year. The owners of the company have the opportunity to invest in a new project that requires an initial investment of 10 today and generates a certain cash flow of 20 in one year. The risk-free interest rate is 10% and all parties are risk-neutral. a) Calculate the net present value of the new project and state whether the company should invest in the project. b) Do the owners of the company invest in the new project with
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