Consider another perpetual project like the crusher described in Section 19-1. Its initial investment is $1,000,000, and
Question:
Use APV to calculate this project's value.
a. Assume first that the project will be partly financed with $400,000 of debt and that the debt amount is to be fixed and perpetual.
b. Then assume that the initial borrowing will be increased or reduced in proportion to changes in the market value of this project.
Explain the difference between your answers to (a) and (b).
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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Related Book For
Principles of Corporate Finance
ISBN: 978-1259144387
12th edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen
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