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Please solve for all the parts of the question and I will rate your answer with a thumbs up. Thank you! Q10- Consider a project

image text in transcribedPlease solve for all the parts of the question and I will rate your answer with a thumbs up. Thank you!

Q10- Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $80,000, and the project's cost of capital is 15%. The risk-free interest rate is 5%. 1. Determine if it is worth to undertake the above project. (5 pts.) 2. 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. Determine the market value of the unlevered equity for this project. (5 pts.) 3. Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk free rate. Determine the cash flow that equity holders will receive in one year in a weak economy. (5 pts.) 4. Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk free rate. Determine the value of the firm's levered equity from the project. (5 pts.) 5. Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk free rate. Determine the cost of capital for the firm's levered equity. (10 pts.) Q10- Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $80,000, and the project's cost of capital is 15%. The risk-free interest rate is 5%. 1. Determine if it is worth to undertake the above project. (5 pts.) 2. 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. Determine the market value of the unlevered equity for this project. (5 pts.) 3. Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk free rate. Determine the cash flow that equity holders will receive in one year in a weak economy. (5 pts.) 4. Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk free rate. Determine the value of the firm's levered equity from the project. (5 pts.) 5. Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk free rate. Determine the cost of capital for the firm's levered equity. (10 pts.)

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