1. Consider a project with free cash flows in one year of $110,000 in a weak economy or $146,000 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $100,000, and the project's cost of capital is 13.40%. The risk-free interest rate is 5%. Suppose that to raise the funds for the initial investment, the project is sold to investors as an all-equity firm. The equity holders will receive the cash flows of the project in one year. What is the market value of the unlevered equity for this project?

		$115,227.73
		$112,874.78
		$110,521.83
		$108,168.88
		$105,815.93

2. A company expected to have free cash flow in the coming year of $9 million, and this free cash flow is expected to grow at a rate of 3% per year thereafter. The company has an equity cost of capital of 10.30%, a debt cost of capital of 6.5%, and it has a 21% corporate tax rate. If the company currently maintains a .5 debt to equity ratio, then what is the value of the company as an all-equity firm in $ million? (Hint: use the pre-tax WACC to discount the unlevered cash flows)

		$122.21
		$128.95
		$135.69
		$142.43
		$149.17