Under the same assumptions as in Section 22.3, suppose your corporation owns an operating electric car dealership,

Question:

Under the same assumptions as in Section 22.3, suppose your corporation owns an operating electric car dealership, together with one-year options to open five more.

a. What is the value and beta of your firm if the expected first-year free cash flow for all dealerships is $600,000?

b. What is the value and beta of your firm if the expected first-year free cash flow for all dealerships is $300,000?

c. In which case do your options have higher beta? In which case does your firm have higher beta? Why?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...