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M Consider a one-year project with free cash flows in one year of $100,000 in a weak economy or $120,000 in a strong economy, with

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M Consider a one-year project with free cash flows in one year of $100,000 in a weak economy or $120,000 in a strong economy, with each outcome being equally likely. The initial investment required for the project in $100,000, and the project's cost of capital is 10w. The risk-free interest rate is 4%. Suppose that to raise the funds for the initial investment the firm borrows $60,000 at the risk free tate and issues new equity to cover the remainder. The borrowed funds will be paid back in one year. What is the cost of capital for the firm's levered equity in percentage terms? (Hint: You should start with computing the value of the firm's levered equity from the project at to and t-1.) [Type only the final answer into the response box below (NOT into the Notes box) and in pure numeric format Do NOT use w/ signs, commas or spaces (eg, only enter 10 if it is 10 days/810/10%) 9 of 14 Report question issue Notes Unsure Marie Consider a one-year project with free cash flows in one year of 100,000 in a weak economy or $120,000 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $100,000, and the project's cost of capital is 10%. The risk-free interest rate is 4%. Suppose that to raise the funds for the initial investment the firm borrows $50.000 at the risk free rate and issues new equity to cover the remainder. The borrowed funds will be paid back in one year. What is the cost of capital for the firm's levered equity in percentage terms? (Hint: You should start with computing the value of the firm's levered equity from the project at and t-1) Type only the final answer into the response box below (NOT into the Notes box) and in pure numeric format Do NOT USE 8 nigra, commes or spaces (eg. only enter 10 if it is 10 days/$10/10)] of 14

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