Multiple Choice
The flow-to-equity approach has been used by the firm to value their capital budgeting projects. The total investment cost at time 0 is $640,000. The company uses the flow-to-equity approach because they maintain a target debt to value ratio over project lives. The company has a debt to equity ratio of 0.5. The present value of the project including debt financing is $810,994. What is the relevant initial investment cost to use in determining the value of the project?
A) $170,994
B) $267,628
C) $372,372
D) $543,366
E) $640,000
Correct Answer:
Verified
Correct Answer:
Verified
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