question archive F has 300,000 shares outstanding with a market value of $25 each and no debt
F has 300,000 shares outstanding with a market value of $25 each and no debt
Subject:FinancePrice: Bought3
F has 300,000 shares outstanding with a market value of $25 each and no debt. The β of F's equity is 0.9, the risk-free rate is 4% and the expected return of the market portfolio is 9%. F considers the following operation
Operation 2)F invests $1,500,000 in a project that generates $200,000 per year after tax (perpetuity). This project has the same systematic risk as F's existing assets. The investment cost is financed by issuing debt for the same amount ($1,500,000). If you hold one F stock, how much value is created/destroyed for you in this operation?
