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Two Separate Firms Are Considering Investing in This Project

Question 86

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Two separate firms are considering investing in this project.Firm unlevered plans to fund the entire $80,000 investment using equity,while firm levered plans to borrow $45,000 at the risk-free rate and use equity to finance the remainder of the initial investment.Calculate the risk premiums for both the levered and unlevered firm.

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blured image
PV(equity cash flows)= blured image
= $90,000
C/F...

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