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Please answer all 5 value boxes . TIA Consider a project with free cash flow in one year of $143,763 or $171,691, with either outcome
Please answer all 5 value boxes . TIA
Consider a project with free cash flow in one year of $143,763 or $171,691, with either outcome being equally likely. The initial investment required for the project is $85,000, and the project's cost of capital is 23%. The risk-free interest rate is 11%. (Assume no taxes or distress costs.) a. What is the NPV of this project? b. 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. How much money can b raised in this way-that is, what is the initial market value of the unlevered equity? c. Suppose the initial $85,000 is instead raised by borrowing at the risk-free interest rate. What are the cash flows of the levered equity, and what is its initial value according to M\&M? a. What is the NPV of this project? The NPV is $ (Round to the nearest dollar.) b. 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. How much money can b raised in this way - that is, what is the initial market value of the unlevered equity? The initial market value of the unlevered equity is $ (Round to the nearest dollar.) c. Suppose the initial $85,000 is instead raised by borrowing at the risk-free interest rate. What are the cash flows of the levered equity, and what is its initial value according to M\&M? The cash flows of the levered equity and the initial market value of the levered equity according to M\&M is: (Round to the nearest dollar.)Step by Step Solution
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