Levered Inc’s market value of equity is $60 million and market value of its debt is $50 million. Levered’s pretax cost o

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Levered Inc’s market value of equity is $60 million and market
value of its debt is $50 million. Levered’s pretax cost of debt is
9.0%, while corporate tax rate is 34%. The risk-free rate is 4%,
while the expected market return is 12%. Levered’s firm level beta
is 0.70.
In part (e) suppose that this company considers a
project that will bring $150,000 at the end of year 1 and $100,000
at the end of year 2. The initial investment is $250,000. The
project will be financed by the same combination of debt and
equity.