Home / Questions / Consider a project with free cash flows in one year of â$138 comma 307138,307 or â$191...
Consider a project with free cash flows in one year of â$138 comma 307138,307 or â$191 comma 367191,367â, with each outcome being equally likely. The initial investment required for the project is â$90 comma 85090,850â, and theâ project's cost of capital is 18 %18%. Theâ risk-free interest rate is 8 %8%. a. What is the NPV of thisâ project? b. Suppose that to raise the funds for the initialâ investment, the project is sold to investors as anâ all-equity firm. The equity holders will receive the cash flows of the project in one year. How much money can be raised in this waylong dashâthat âis, what is the initial market value of the unleveredâ equity?ââ c. Suppose the initial â$90 comma 85090,850 is instead rais
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