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Consider a project with free cash flows in one year of $135320 or $192577 with each outcome being equally liekly. The intitial investment required for the project is $102884, and the project's cost of capital is 19% The risk free interest rate is 10%.

Suppose the initial $102,884 is instead 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?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92270637

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