complete all parts a through D
Kotwe Corporation plans to issue quilty to raise $55 milion to finance a new investment. After making the investment, Kohwe expects to earn free cash flows of $10 milion each year, Kohwe currently has 5 milion shares outstanding, and it has to other assets or opportunities. Suppose the appropriate discount rate for Kowe's future free cash fows is 9%, and the only capital market imperfections are corporate taxes and Franciel distress costs a. What is the NPV of Kowe's investment? b. What is Kohwe's share price today? Susposa Kolme borrows the $16 million instead. The firm will pay interest only on this loan each year, and a wil maintain an outstanding balance of 565 milion on the loan. Suppose that Kohwe's corporate tax rato a c. What is Kowe's share price today in the investment is financed with det? Now suppose that with leverage Kohms's expected free cash flows wil decine to $9 million per year due to reduced tales and other financial distress costs. Assume that the appropriate discount este for Kower's d. What is Kowe's share price today given the financial distress costs of leverage? a. What is the NPV of Kohwe's investment? The NPV is $ milion (Round to one decimal place) P16-9 (similar to) Question Help C Kowe Corporation plans to issue equity to raise $55 million to finance a new investment. After making the investment, Kohwe expects to earn free cash flows of $10 milion each year, Kohwe currently has 5 million shares outstanding, and it has no other assets or opportunities. Suppose the appropriate discount rate for Kohwe's future free cash flow is 9%, and the only capital market imperfections are corporate taxes and financial distress costs a. What is the NPV of Kowe's investment? b. What is Kowe's share price today? Suppose Kohwe borrows the $56 million instead. The firm will pay interest only on this loan each year, and it will maintain an outstanding balance of 555 million on the loan. Suppose that Kowe's corporate tax rate is 30%, and expected from cash flows are still $10 milion each year. c. What is Kohwe's share price today if the investment is financed with debt? Now suppose that with leverage, Kohwe's expected free cash flows will decline to $9 million per year due to reduced sales and other financial distress costs. Assume that the appropriate discount rate for Kohwe's bure free cash fows is still 9% d. What is Kohwe's share price today given the financial distress costs of leverage? a. What is the NPV of Kohwe's investment? The NPV is $million (Round to one decimal place)
