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Firm Bullcat is an all - equity firm that has expected free cash flows of $10M...

Firm Bullcat is an all - equity firm that has expected free cash flows of $10M per year in perpetuity starting next year.The cost of capital for this unlevered firm is 10 percent. The firm has 5million shares outstanding. Assume a perfect market.

a) Construct the current market value balance sheet.

in million dollars A E+L
cash 0 Debt 0
exisiting asset Equity
Total Asset Total E=L


b) What is the current share price of Bullcat stock?



Firm Bullcat is also considering a new project. The new project requires an initial investment of $8M and will generate additional cash flow of $1M per year in perpetuity. Assume that the new project is similar to Bullcat’s existing projects.


c) What is the NPV of the new project?

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Expert Solution

jeff jeffy answered 1 year ago
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