Sarvon Systems has a debt-equity ratio of 1.3,an equitybeta of 1.6, and a debt beta of 0.22. It currently is evaluatingthe following projects,
Project A B C D EInvestment 101 53 84 28 72NPV 22 6 11 14 17
, none of which would change the firm'svolatility (amounts in $ millions).
a. Which project will equity holders agree to fund?
b. What is the cost to the firm of the debt overhang?
Sarvon Systems has a debt-equity ratio of 1.3,an equity beta of 1.6, and a debt beta of 0.22. It currently is evaluat
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answerhappygod
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