Question
The flow-to-equity (FTE) approach has been used by the firm to value its capital budgeting projects. The total investment cost at Time 0 is $640,000.
The flow-to-equity (FTE) approach has been used by the firm to value its capital budgeting projects. The total investment cost at Time 0 is $640,000. The company uses the flow-to-equity approach because it maintains a target debt to equity value of 0.5, and it plans to finance this project using the same debt-to-equity ratio. What is the relevant initial investment cost to use in determining the value of the project?
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
