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Consider a project with free cash flow in one year of $133,468 or $192,821, with either outcome being equally likely. The initial investment required for the project is $95,000, and the project's cost of capital is 18%. The risk-free interest rate is 3%
Consider a project with free cash flow in one year of $138,445 or $189,120, with either outcome being equally likely. The initial investment required for the project is $95,000, and the project's cost of capital is 25%. The risk-free interest rate is 7%. (Assume no taxes or distresscosts.) 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...
Consider a project with free cash flow in one year of $145,930 or $160,062, with either outcome being equally likely. The initial investment required for the project is $105,000, and the project's cost of capital is 20%. The risk-free interest rate is 6%. (Assume no taxes or distress costs.) 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...
Consider a project with free cash flows in one year of $143,
429 or $190,456with each outcome being equally likely. The initial
investment required for the project is $106,859 and the project's
cost of capital is 23 %. The risk-free interest rate is 6 %
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...
Consider a project with free cash flow in one year of $131,129 or $198,043, with each outcome being equally likely. The initial investment required for the project is $80,000, and the project's unlevered cost of capital is 16%. The risk-free interest rate is 6%. (Assume no taxes or distress costs.) 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...
Consider a project with free cash flow in one year of $130,000 in a weak market or $180,000 in a strong market, with each outcome being equally likely. The initial investment required for the project is $100,000, and the project's unlevered cost of capital is 20%. The risk-free interest rate is 10%. (Assume no taxes or distress costs.) a. What is the NPV of this project? b. Suppose that to raise the funds for the initial investment, the project is...
Consider a project with free cash flow in one year of $130,000 in a weak market or $180,000 in a strong market, with each outcome being equally likely. The initial investment required for the project is $100,000, and the project's unlevered cost of capital is 20%. The risk-free interest rate is 10%. (Assume no taxes or distress costs. a. What is the NPV of this project? b. Suppose that to raise the funds for the initial investment, the project is...
Suppose a security with a risk-free cash flow of $152 in one year trades for $137 today. If there are no arbitrage opportunities, what is the current risk-free interest rate?
Your firm has a risk-free investment opportunity with an initial investment of $156,000 today and receive $180,000 in one year. For what level of interest rates is this project attractive?
Consider a project that requires an initial investment of $98,000 and will produce a single cash flow of $155,000 in 6 years.a. What is the NPV of this project if the 6-year interest rate is 4.9% (EAR)?b. What is the NPV of this project if the 6-year interest rate is 10.2% (EAR)?c. What is the highest 6-year interest rate such that this project is still profitable?