Suppose your corporation owns an operating electric car dealership, together with one-year options to open five more. From a previous study, you know that the value of the operating dealership is $5.9 million and the value of a one-year call option is $1.17 million. Additionally, the beta of the operating dealership is 1.97, while the beta of the one-year option is 6.42. The appropriate cost of capital for this investment is 12.2%, while the risk-free rate and volatility are 5.1% and 37%, respectively. a. What is the value and beta of your firm if the expected first-year free cash flow for all dealerships is $590,000? (In this case, the value of an operating dealership is $5.9 million.) b. What is the value and beta of your firm if the expected first-year free cash flow for all dealerships is $330.000? (In this case, the value of an operating dealership is $3.3 million.) c. In which case do your options have higher beta? In which case does your firm have higher beta? Why? an operating dealership is $5.9 million.) a. What is the value and beta of your firm if the expected first-year free cash flow for all dealerships is $590,000? (In this case, the value The value of the firm is $ million. (Round to two decimal places.) Help me solve this View an example Get more help Clear all Check answer Suppose your corporation owns an operating electric car dealership, together with one-year options to open five more. From a previous study, you know that the value of the operating dealership is $5.9 million and the value of a one-year call option is $1.17 million. Additionally, the beta of the operating dealership is 1.97, while the beta of the one-year option is 6.42. The appropriate cost of capital for this investment is 12.2%, while the risk-free rate and volatility are 5.1% and 37%, respectively. a. What is the value and beta of your firm if the expected first-year free cash flow for all dealerships is $590,000? (In this case, the value of an operating dealership is $5.9 million.) b. What is the value and beta of your firm if the expected first-year free cash flow for all dealerships is $330.000? (In this case, the value of an operating dealership is $3.3 million.) c. In which case do your options have higher beta? In which case does your firm have higher beta? Why? an operating dealership is $5.9 million.) a. What is the value and beta of your firm if the expected first-year free cash flow for all dealerships is $590,000? (In this case, the value The value of the firm is $ million. (Round to two decimal places.) Help me solve this View an example Get more help Clear all Check
