What are the cash flows of the levered? equity

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Consider a project with free cash flows in one year of ?$141,300 or ?$183,700?, with each outcome being equally likely. The initial investment required for the project is ?$94,700?, and the? project's cost of capital is 23%. The? risk-free interest rate is 12%.

Problem a. What is the NPV of this? project?

Problem 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?

Problem c. Suppose the initial ?$94,700 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: EM132993119

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