Question
In one year, you expected your firm to be worth $50, $100, $120 with probabilities of 0.1 0.6 and 0.3. respectively. You can raise $75
In one year, you expected your firm to be worth $50, $100, $120 with probabilities of 0.1 0.6 and 0.3. respectively. You can raise $75 in debt proceeds today if you promise to pay an interest rate of 10% in one year along with principal. If this is how you finance your firm, then you cost of equity is 20%. There are no taxes.
What is the present value of firm
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Fundamentals Of Management
Authors: Ricky Griffin
10th Edition
9780357517345
