A firm will give a one-time cash flow of $22,000 after one year.If the project risk requires a return of 11%,what is the levered value of the firm with perfect capital markets?

Question

Quizplus · Accepted Answer

The levered value of the firm is equal to the present value of the one-time cash flow, which is $22,000, discounted at the required return of 11%. Therefore, levered value = $22,000 / 1.11 = $19,820. Option C is the closest option.

A Firm Will Give a One-Time Cash Flow of $22,000