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Chema Corp. will exist for one year and their year-end cash flow per share is expected to be $75. Chema Corp. only faces one risk:
Chema Corp. will exist for one year and their year-end cash flow per share is expected to be $75. Chema Corp. only faces one risk: the risk of a lawsuit. Assume there is a 10 percent chance Chema Corp. will incur a lawsuit that will reduce their year-end cash flow per share by $25. What is the value per share of Chema Corp. today if the appropriate discount rate is 5 percent? Ignore the effect of taxes and assume the firm has no debt.
Chema Corp. will exist for one year and their year-end cash flow per share is expected to be $75. Chema Corp. only faces one risk: the risk of a lawsuit. Assume there is a 10 percent chance Chema Corp. will incur a lawsuit that will reduce their year-end cash flow per share by $25. What is the value per share of Chema Corp. today if the appropriate discount rate is 5 percent? Ignore the effect of taxes and assume the firm has no debt.
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