Assume that all parties involved face an interest rate of 8%. An enterprise can be financed which will generate $10 million in earnings annually forever and with no risk with either the sale of 1% of the equity or by taking on corporate debt with a face value of $1 million, a coupon rate of 10% and ten years to maturity. What is the present value of each?

Answer rating: 100% (QA)

1 Annual cash inflow is 10 million foreverGiven So its a perpetuity of 10 mill... View the full answer