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I am not sure how to do the first two questions an answer with the first two questions would be really helpful The following information
I am not sure how to do the first two questions an answer with the first two questions would be really helpful
The following information pertains to questions 32 to 35. Energy Corp. has a market capitalization of $15 billion and debt with market value of $5 billion. Energy will keep its current Debt-to-Equity ratio constant. The equity cost of capital is rE 10% and the cost of debt is rp = 6%. The corporate tax rate is 35%. Assume a market risk premium of 6% and a risky-free rate of 5%. = 9 The firm is considering an expansion project (i.e., same risk as the firm's assets) with the following cash flows: Year 0 12 Free Cash Flows (SM) -100 70 120 32. What is the Net Present Value of the project? (A) S 65.00M (B) $ 66.51M Correct (C) $ 70.00M (D) $ 72.24M 33. Assume (correctly or incorrectly) that the Net Present Value of the project is $65M. How much new equity will Energy need to start the project? (A) S 75.00M (B) $ 58.75M Correct (C) $ 50.50M (D) $ 45.00M Step by Step Solution
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