A manufacture company is evaluating a new project. If the company issues $3,000 equity to finance...

A manufacture company is evaluating a new project. If the company issues $3,000 equity to finance the project, the project will return $3,750 or 25% in one year. Assuming the required rate of return is 16% and the tax rate is zero. Without the project, the company is expected to generate $5,500 cash flow if the economy is in the best case, $4,000 if the economy is in an average case, and $2,000 if the economy is in the worst case. Each economic outcome has an equal possibility to occur. There is a $4,000 debt due in one year. Do you recommend the company to take the project? What is the value of equity if the project is taken?

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

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