A Project Costs $14 Million and Is Expected to Produce

question 75

Multiple Choice

A project costs $14 million and is expected to produce cash flows of $4 million per year for 15 years. The opportunity cost of capital is 20 percent. If the firm has to issue stock to undertake the project and issue costs are $1 million, what is the project's APV?

• A)$3.7 million
• B)$4.5 million
• C)$4.7 million
• D)$3 million

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Definitions:

Pituitary Gland

A small, pea-sized gland located at the base of the brain that produces hormones influencing various bodily functions.

Adrenal Gland

A small gland located above the kidneys that produces hormones such as adrenaline and cortisol, which are involved in stress response.

Broca's Area

An area located in the dominant hemisphere's frontal lobe, typically on the left side of the brain, associated with the generation of speech.

Wernicke's Area

Wernicke's Area is a region of the brain that is involved in the understanding of written and spoken language.