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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 $75 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 ? million dollars (ii -- 2 points) What is the current market value of KSA? million dollars x (b) Suppose KSA is financed by both debt and equity. KSA has an outstanding loan of $40 million, which carries an interest rate of 5%. (i -- 2 points) What is the total after-tax cash flow for KSA in year 1 ? (b) Suppose KSA is financed by both debt and equity. KSA has an outstanding loan of $40 million, which carries an intere rate of 5%. (i -- 2 points) What is the total after-tax cash flow for KSA in year 1 ? million dollars x (ii -- 2 points) What is the current market value of KSA in this case? million dollars x (iii -- 1 point) What is the current market value of KSA's debt? million dollars (iv -- 1 point) What is the current market value of KSA's equity in this case? million dollars Note: Your answer is conditionallv correct. Make sure to chande it accordinalv if vou chanae previous answers. (ii -- 2 points) What is the current market value of KSA in this case? million dollars x (iii -- 1 point) What is the current market value of KSA's debt? million dollars (iv -- 1 point) What is the current market value of KSA's equity in this case? million dollars Note: Your answer is conditionally correct. Make sure to change it accordingly if you change previous answers. ( v1 point) What is KSA's debt-to-equity ratio? Note: Your answer is conditionally correct. Make sure to change it accordingly if you change previous answers

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