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QUESTION 3 1 points Using the Modigliani-Miller (MM) theory in a perfect market, you want to evaluate a project and how to finance it. The
QUESTION 3 1 points Using the Modigliani-Miller (MM) theory in a perfect market, you want to evaluate a project and how to finance it. The project has free cash flows in one year of $90 in a weak economy or $120 in a strong economy. There is 75% chance that the economy is strong. The initial investment required for the project is $80, and the project's cost of capital is 10%. The risk free interest rate is 5% Suppose that to raise the funds for the initial investment, the project is sold to investors as an all-equity firm. The highest possible realized return of the unlevered equity is closest to: A.-20.15% 8..12.00% C. 17.34% OD. 10.00%
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