Megas produces gyros and stuffed grape leaves. It has the followingcaptial structure. Its debt is 60million and its equity is 40 million. It's riskfree rate is 3%, while the expected return of the market is 10%, and itsbeta is 1.2. Megas intends to invest 500 million into a gyro projectwanting to become the biggest seller in the American continent. Thus, itexpects to receive 200m (EBIT(1-t)) annually for 20 years on thisinvestestment. The depreciation is straight line for 20 years (based on the500m investment. For the grape leaves project, MEGAS will invest 1billion and recieve 200million annually, in terms of both operating profitand after tax plus depreciation. Compute the value of MEGAS.

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Answered: Megas produces gyros and stuffed grape…

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

Section: Chapter Questions

Problem 1PS

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