A firm is considering investing in a new project with an upfront cost of $300 million. The project will generate an incremental free cash flow of $50 million in the first year and this cashflow is expected to grow at an annual rate of 5% forever. If the firm's WACC is 11%, what is the value of this project? ..... A. $833.3 million O B. $875.0 million C. $575.0 million D. $533.3 million

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A firm is considering investing in a new project with an upfront cost of $300 million. The project will generate an incremental free cash
flow of $50 million in the first year and this cashflow is expected to grow at an annual rate of 5% forever. If the firm's WACC is 11%,
what is the value of this project?
A. $833.3 million
B. $875.0 million
C. $575.0 million
D. $533.3 million
Transcribed Image Text:A firm is considering investing in a new project with an upfront cost of $300 million. The project will generate an incremental free cash flow of $50 million in the first year and this cashflow is expected to grow at an annual rate of 5% forever. If the firm's WACC is 11%, what is the value of this project? A. $833.3 million B. $875.0 million C. $575.0 million D. $533.3 million
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