Question

A new business wil generate a one-time cash flo of the firm with perfect capital markets? 0 S22 after one year. The business will be financed with 60% equity and 40% t. ms unlever equity cost capital S %, what s el vere value O A. $24,200 B. $19,580 O c. $18,182 O D. $19,820 O E. $20,000

0 0
Add a comment Improve this question Transcribed image text
Answer #1

D. $19,820

Since the levered value of the firm equals the unlevered value of the firm, compute the present value of the cash flow using the unlevered equity cost of capital

$22,000 / 1.11 = $19,820

Add a comment
Know the answer?
Add Answer to:
A new business wil generate a one-time cash flo of the firm with perfect capital markets?...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • A new business requires a $20,000 investment today and will generate a one-time cash flow of...

    A new business requires a $20,000 investment today and will generate a one-time cash flow of $25,000 after one year. The business will be financed with 20% equity and 80% debt. If the firm can borrow at 4%, what is the return on levered equity? O A. 125% OB. 25% O C. 109% OD. 33% O E. 21%

  • One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned...

    One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned that a new machine is available that offers many advantages, you can purchase it for $150,000 today. It will be depreciated on a straight line basis over ten years, after which it has no salvage value. You expect that the new machine will contribute EBITDA (earnings before interest, taxes depreciation, and amortization) of $40,000 per year for the next ten years. The current machine...

  • Problem 1: Financial Statement Ratio Analysis (40 points total) Use the following financial statements for Dell,...

    Problem 1: Financial Statement Ratio Analysis (40 points total) Use the following financial statements for Dell, Inc. to answer the questions which follow: BALANCE SHEET (SMil) 2017 10,298 2018 7,972 % 28.9 2019 9,092 % 34.3 40.2 Cash & Short Term Investments Accounts Receivable Inventory Other Current Assets Total Current Assets Net Fixed Assets Intangibles Other Long Term Assets Total Assets 6,152 24.0 660 2.6 2,829 11.3 19.939 76.6 2,409 8.7 0 0 3,287 14.7 25,635 100.0 7,693 27.9 1,180...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT