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Your company has $10,000,000 in excess cash - more than you need to provide a cushion on your balance sheet to protect against risk. Jane,
Your company has $10,000,000 in "excess cash" - more than you need to provide a cushion on your balance sheet to protect against risk. Jane, your crack financial analyst, has prepared an option for you to consider:Keep the $10,000,000 on the balance sheet and earn a 3.0% after-tax return from the bank for the next 15 years.Jane tells you that your tax-affected cost of capital (the appropriate discount rate to use) is 20%. Whatis the value of this option to current shareholders? Is it =: -7,948,303 or 2,537,987 or -9,966,354 or 6,623,589
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