What are the cash flows of the levered? equity

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Reference no: EM133429438

Consider a project with free cash flows in one year of $142,500 or $172,500?, with each outcome being equally likely. The initial investment required for the project is $96,000?, and the? project's cost of capital is 18%. The? risk-free interest rate is 11%.

a. What is the NPV of this? project?

b. Suppose that to raise the funds for the initial? investment, the project is sold to investors as an? 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 way-that is, what is the initial market value of the unlevered? equity?

c. Suppose the initial $96,000 is instead raised by borrowing at the? risk-free interest rate. What are the cash flows of the levered? equity, what is its initial value and what is the initial equity according to? MM?

Reference no: EM133429438

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