Expected cash flow to merrimack company shareholders

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Reference no: EM131854379

Merrimack Company is considering an investment project that generates a cash flow of $3,200 next year if the economy is favorable but generates only $1,600 if the economy is unfavorable. The probability of favorable economy is 60% and of unfavorable economy is 40%. The project will last only one year and be closed after that. The cost of investment is $2,500 and Merrimack Company plans to finance the project with $800 of equity and $1,700 of debt. Assuming the discount rates of both equity and debt are 0%. What is the expected cash flow to Merrimack Company's shareholders if the company invests in the project?

Reference no: EM131854379

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