You are given the following information about a project: i) It is expected to generate 6 million
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Question:
You are given the following information about a project:
i) It is expected to generate 6 million per year of revenues perpetually.
ii) The cost of capital for the project is 12%.
iii) The fixed costs of the project are 1 million per year.
iv) The variable costs of the project are 15% of revenues.
v) The annual effective risk-free rate is 4%.
Calculate:
a) The value of the project.
b) The operating leverage of the project.
Related Book For
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman
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