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QUESTION 16 Use the information for the question(s) below. Consider a project with free cash flows in one year of $90,000 in a weak economy
QUESTION 16 Use the information for the question(s) below. 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%. Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk-free rate, then the cash flow that equity holders will receive in one year in a weak economy is closest to: $33,000. $0. $10,000. $6000
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