Suppose your corporation owns an operating electric car dealership, together with one-year options to open five more. From a previous study, you know that the value of the operating dealership  $6.1 million and the value of a one-year call option is $1.22 million. Additionally, the beta of the operating dealership is 2.12, while the beta of the one-year option is 6.42. The appropriate cost of capital for this investment is 11.5%, while the risk-free rate and volatility are 4.9% and 40%, respectively.

a. What is the value and beta of your firm if the expected first-year free cash flow for all dealerships is $620,000?  (In this case, the value of an operating dealership is$6.2 million.)

1-What is the value of the firm is million. (Round to two decimal places.)

2-The beta of the corporation is (Round to two decimal places.)

b. What is the value and beta of your firm if the expected first-year free cash flow for all dealerships is $260,000?

(In this case, the value of an operating dealership is $2.6

1-What is the value of the firm is million. (Round to two decimal places.)

2- What is the present value of the value of the dealership is million. (Round to two decimal places.)

3-What is the value of d1 is

4- What is the value of d2 is (Round to four decimal places.)

5-What is the value of the option is (Round to the nearest dollar.)

6-What is the value of the firm is million. (Round to the nearest dollar.)

7- What is the beta of the option (Round to two decimal places.)

8-What is the beta of the corporation is (Round to two decimal places.)

Answer rating: 100% (QA)

1The value of the firm is the sum of the value of the operating dealership and the value of the oney... View the full answer