Consider again the electric car dealership in Section 22.3. Suppose the current value of a dealership is

Question:

Consider again the electric car dealership in Section 22.3. Suppose the current value of a dealership is $5 million because the first-year free cash flow is expected to be $500,000 rather than $600,000. What is the beta of a corporation whose only asset is a one-year option to open a dealership? What is the beta if the first year’s cash flows are expected to be $700,000, so a working dealership is worth $7 million?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...