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Assume a zero percent discount rate for simplicity. Your current projects cost $200, and you know they will return $800 next year. There is a
Assume a zero percent discount rate for simplicity. Your current projects cost $200, and you know they will return $800 next year. There is a new project that will cost $300 and will return $500. Your investors believe, however, that both the current projects and the new projects will return only 50%. If you have no cash and can use only equity financing, what will the value of the combined firm be to the existing shareholders if the new project is undertaken?
A) $520 | ||
B) $780 | ||
C) $750 | ||
D) $800 |
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