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can someone help me with this practice problem Consider a firm whose only asset is a plot of vacant land and whose only liability is
can someone help me with this practice problem
Consider a firm whose only asset is a plot of vacant land and whose only liability is debt of $145 million due in one year. If loft vacant, the land will be worth $10.3 million in one year Alternatively, the firm can develop the land at an ap front cost of $20 2 million The developed the land will be worth $345 million in one year Suppose the risk free interest rate is 10.1% cash flows are na tree and there are no taxes a. If the firm chooses not to develop the land, what is the value of the tim's equity today? What is the value of the debt today? b. What is the NPV of developing the land? c. Suppose the firm raises $20 2 million from the equity holdiers to develop the wind the firm develops the land, what is the value of the firm's equity today? What is the value of the firm's debt today? d. Given your answer to part (c) would equity holders be willing to provide the 520 2 million needed to develop the land? a. If the firm chooses not to develop the land, what is the value of the firm sety today? What is the value of the debt today? If the firm chooses not to develop the land the value of the equity is simion (Round to two decimal places) Step by Step Solution
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