Suppose that starting a project requires a company to incur an initial investment of 10 mn $
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Suppose that starting a project requires a company to incur an initial investment of 10 mn $ today and we know that the present value of future cash inflows is 12 mn $. We also know that there is an option to wait for three years for starting the project with the same amount of investment instead of starting it today. The company has the following data: (a) cost of equity = 10%, (b) market return = 11%, (c) levered beta = 0,80, (d) standard deviation (volatility) = 20%. What would be the strategic net present value?
- 1,91
- 3,91
- 5,91
- 2.91
Related Book For
Mathematical Applications for the Management Life and Social Sciences
ISBN: 978-1305108042
11th edition
Authors: Ronald J. Harshbarger, James J. Reynolds
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