Question
Maytag Corporation is considering an investment project that generates a cash flow of $65,000 next year if the economy is favorable but generates only $27,000
Maytag Corporation is considering an investment project that generates a cash flow of $65,000 next year if the economy is favorable but generates only $27,000 if the economy is unfavorable. The probability of favorable economy is 50% and of unfavorable economy is 50%. The project will last only one year and be closed after that. The cost of investment is $47,000 and Maytag Corporation plans to finance the project with $12,000 of equity and $35,000 of debt. Assuming the discount rates of both equity and debt are 0%. What is the expected cash flow to Maytag Corporation's shareholders if the company invests in the project? $0 $30,000 $15,000 $27,000 $35,000
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