Levered equity calculation

Assignment Help Finance Basics

Reference no: EM1338269

Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $80,000, and the project's cost of capital is 15%. The risk-free interest rate is 5%.

Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk free rate, then the value of the firm's levered equity from the project is closest to:

A. $6,000
B. $0
C. $8,600
D. $10,000

Reference no: EM1338269

Questions Cloud

Explain analyzes the success of repeat entrepreneurs : Explain analyzes the success of repeat entrepreneurs and search for opportunities differently than entrepreneurs who found only one company

External equity ramifications : What are the advantages and disadvantages of letting the team administer discipline to a team member?

Express the scope of the project : Define the scope of the project. Create a detailed outline for each section

Discuss the effect of each of the following on the quantity : Discuss the effect of each of the following on the quantity demanded or the demand for new motor homes.

Levered equity calculation : Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy, with each outcome being equally likely.

Describe the meaning of a strategic partner : Describe the meaning of a strategic partner and the ways this can be accomplished in HR.

Explain transfer of knowledge : Explain Transfer of knowledge and How could you use the elements of ADVISE in your work or business to be more productive

Do not know the right demand you can not set the right price : When you do not know the right demand, you can't set the right price. So, instead of setting the price first, how can you find out the right price when there are some uncertainty in your demand estimate?

Iliad and greek civilization : How does the Iliad reveal the powers of the king, the noblemen, and the common soldiers in government during the Greek Middle Ages?

Reviews

Write a Review

Required(*) Message

Finance Basics Questions & Answers

Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

User Account

All Pages