Consider a project with free cash flows in one year of $$90,000$ in a weak economy or $$117,000$ in a strong economy, with each outcome being equally likely. The initial investment required for the project is $$80,000,$ and the project's cost of capital is $15\%.$ The risk$-$free interest rate is $5\%.$

Hint: refer to the first example for Ch $14$

Report the following numbers:

$1.$ NPV for this project

$2.$ Suppose that to raise the funds for the initial investment, the project is sold to investors as an all$-$equity firm. The equity holders will receive the cash flows of the project in one year. Calculate present value of equity cash flows $($market value of unlevered equity$)$

$3.$ Suppose that to raise the funds for the initial investment the firm borrows $$80,000$ at the risk$-$free rate. Calculate the cash flow that equity holders will receive in one year in a week economy.

$4.$ Calculate the cash flow that equity holders will receive in one year in a strong economy.

$5.$ Calculate present value of levered equity cash flows $($market value of levered equity$)$Consider a project with free cash flows in one year of $$90,000$ in a weak economy or $$117,000$ in a strong economy, with each outcome being equally likely. The initial investment required for the project is $$80,000,$ and the project's cost of capital is $15\%.$ The risk$-$free interest rate is $5\%.$

Hint: refer to the first example for Ch $14$

Report the following numbers:

$1.$ NPV for this project

$2.$ Suppose that to raise the funds for the initial investment, the project is sold to investors as an all$-$equity firm. The equity holders will receive the cash flows of the project in one year. Calculate present value of equity cash flows $($market value of unlevered equity$)$

$3.$ Suppose that to raise the funds for the initial investment the firm borrows $$80,000$ at the risk$-$free rate. Calculate the cash flow that equity holders will receive in one year in a week economy.

$4.$ Calculate the cash flow that equity holders will receive in one year in a strong economy.

$5.$ Calculate present value of levered equity cash flows $($market value of levered equity$)$Consider a project with free cash flows in one year of $$90,000$ in a weak economy or $$117,000$ in a strong economy, with each outcome being equally likely. The initial investment required for the project is $$80,000,$ and the project's cost of capital is $15\%.$ The risk$-$free interest rate is $5\%.$

Hint: refer to the first example for Ch $14$

Report the following numbers:

$1.$ NPV for this project

$2.$ Suppose that to raise the funds for the initial investment, the project is sold to investors as an all$-$equity firm. The equity holders will receive the cash flows of the project in one year. Calculate present value of equity cash flows $($market value of unlevered equity$)$

$3.$ Suppose that to raise the funds for the initial investment the firm borrows $$80,000$ at the risk$-$free rate. Calculate the cash flow that equity holders will receive in one year in a week economy.

$4.$ Calculate the cash flow weakthat equity holders will receive in one year in a strong economy.

$5.$ Calculate present value of levered equity cash flows $($market value of levered equity$)$