1. Use the information for the question(s) below. (Capital Structure) 10pts Consider a project with free cash flows in one year of $90,000 in a weak economy or $117.000 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $80,000, and the project's cost of capital is 15%. The risk-free interest rate is 5%|- a. The NPV for this project is closest to: b. 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. The market value of the unlevered equity for this project is closest to: c. Suppose that to raise the funds for the initial investment the firm borrows $40,000 at the risk free rate and issues new equity to cover the remainder. In this situation, the cash flow that equity holders will receive in one year in a weak and strong economy are closest to: d. Suppose that to raise the funds for the initial investment the firm borrows $40,000 at the risk free rate and issues new equity to cover the remainder. In this situation the value of the firm's levered equity from the project is closest to: e e. Suppose that to raise the funds for the initial investment the firm borrows $40,000 at the risk free rate and issues new equity to cover the remainder. In this situation, the cost of capital for the firm's levered equity is closest to: Date 0 Initial Value $40,000 Date 1: Cash Flowse Stronge Weake Date 1: Returns Strong Weake Expected Return 5% Debte 5% 596 ,, Levered Equity Unlevered Equity $90,000 $117.000 e $90,000 15% 1. Use the information for the question(s) below. (Capital Structure) 10pts Consider a project with free cash flows in one year of $90,000 in a weak economy or $117.000 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $80,000, and the project's cost of capital is 15%. The risk-free interest rate is 5%|- a. The NPV for this project is closest to: b. 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. The market value of the unlevered equity for this project is closest to: c. Suppose that to raise the funds for the initial investment the firm borrows $40,000 at the risk free rate and issues new equity to cover the remainder. In this situation, the cash flow that equity holders will receive in one year in a weak and strong economy are closest to: d. Suppose that to raise the funds for the initial investment the firm borrows $40,000 at the risk free rate and issues new equity to cover the remainder. In this situation the value of the firm's levered equity from the project is closest to: e e. Suppose that to raise the funds for the initial investment the firm borrows $40,000 at the risk free rate and issues new equity to cover the remainder. In this situation, the cost of capital for the firm's levered equity is closest to: Date 0 Initial Value $40,000 Date 1: Cash Flowse Stronge Weake Date 1: Returns Strong Weake Expected Return 5% Debte 5% 596 ,, Levered Equity Unlevered Equity $90,000 $117.000 e $90,000 15%