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please answer question C part 1 and 2 and D A firm has 500,000 shares outstanding at a price of $100/ share so that its
please answer question C part 1 and 2 and D
A firm has 500,000 shares outstanding at a price of $100/ share so that its market value is (500k)($100)= S1B. The firm's investment projects are financed by debt only. Currently the firm is considering an investment project that will cost $1,000,000 and generate cash flows of $500,000,5400,000,$400,000, and $150,000 in years 1 through 4. a. (i) If the current required rate of return is 20%, find the present value of the cash flows. Note: This is actually a net present value. (5 points) (ii) Based on your answer in part ( ), should the firm invest in this project? ( 3 points) (i) The Federal Reserve decides to stimulate the cconomy by purchasing a large quantity Find the present value of the cash flows (or net present value) as in part and. (5 points) (ii) Based on your answer in b( 0 , should the firm invest in this project? (3 points) I c. (i) Based on your answer to b(ii), how much value is added to cach shere? (4 points) (ii) If the price of each share was 5100 before, how much will it be after news of this investment is made public? Note: Apply Semi-Strong Form BMH. (3 points) 4. If the fim invests in the project, has the project been indirectly made liquid? Note: This is for the rate at 15% case. ( 2 points) Step by Step Solution
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