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ABC Corp. knows that it will operate only for one year. The firm currently has projects which generate free cash flows of $100 or $20
ABC Corp. knows that it will operate only for one year. The firm currently has projects which generate free cash flows of $100 or $20 with equal probability. The firm is partly financed with debt which has a face value of $50 and matures one year from now (when the firm closes). A new project which guarantees $15 next year arrives. To invest in the project, the firm must spend $10 now. For the questions below, assume that the interest rate is 0%. (that is, no discounting). 26. What is the value of the firm? a. Between (5, 20) b. Between (20, 35) c. Between (35, 50) d. Between (50, 65) e. Between (65, 80) 27. What is the NPV
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