please show your work. all other answers posted on here are incorrect. Kendall Square Associates...
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please show your work. all other answers posted on here are incorrect.
Kendall Square Associates (KSA), is a partnership set up to develop a condo in Cambridge. Its only asset is a condo project to be completed next year, which will yield a net cash flow of $90 millon (in year 1). KSA faces a corporate tax rate of 35% and its asset has an expected rate of return (cost of capital) of 15% by the market. KSA pays out all its earnings to shareholders as dividends. Assume shareholders pay no taxes on dividends.
(a) Suppose KSA is 100% equity financed. (i -- 1 point) What is the after-tax cash flow for KSA in year 1?
(ii -- 2 points) What is the current market value of KSA?
(b) Suppose KSA is financed by both debt and equity. KSA has an outstanding loan of $30 million, which carries an interest rate of 10%.
(i -- 2 points) What is the total after-tax cash flow for KSA in year 1?
(ii -- 2 points) What is the current market value of KSA in this case?
(iii -- 1 point) What is the current market value of KSAs debt?
(iv -- 1 point) What is the current market value of KSAs equity in this case?
(v -- 1 point) What is KSAs debt-to-equity ratio? unanswered
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