answer and show work. In the main

problem that is One-hundred million.

Question 1 A firm has 10 million shares outstanding at a price of 5100/share so that its market value is (IOMXS100) - SIB. The firm's investment projects are financed by debt only. Currently the firm is considering an investment project that will cost and generate cash flows of S30M per year for 4 years. 100.000,00 (i) Ir the current rate of interest is 10%, find the present value of the cash flows. Note: This is actually a net present value. (5 points) NPU= 44,115,156.07 (ii) Based on your answer in part() should the firm invest in this project? (3 points) Ves because NPuso 0 therefore you should invest in this project. b. (0) The Federal Reserve decides to stimulate the economy by purchasing a large quantity of Treasury Securities. The outcome is that the interest rate for the firm is now 5%. Find the present value of the cash flows (or net present value) as in part @) (5 points) (ii) Based on your answer in part (i)should the firm invest in this project? (3 points) c. () (1) Based on your answer to b(ii), how much value is added to each share? (4 points) (ii) If the price of each share was $100 before, how much will it be after news of this investment is made public? Note: Apply Semi-Strong Form EMH. (3 points) d. If the firm invests in the project, has the project been indirectly made liquid? Note: This is for the interest rate at 5% case. (2 points)