A Firm Has a Project with an NPV of −$52

question 46

Multiple Choice

A firm has a project with an NPV of −$52 million. If it has access to risk-free government financing that can create a permanent annual tax shield of $5 million, what is the APV of the project assuming the risk-free interest rate is 6 percent?

• A)−$52 million
• B)$5 million
• C)$31 million
• D)$83 million

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Definitions:

Environmental Impact Statement

A document that the National Environmental Policy Act requires federal agencies to prepare in connection with any legislative proposals or proposed actions that will significantly affect the environment.

NEPA

Stands for the National Environmental Policy Act, a U.S. federal law that promotes the enhancement of the environment and establishes the necessary processes for environmental impact statements.

Local Municipality

A city, town, or other district possessing corporate status and usually its own local government within a larger state or nation.

Injection of Wastes

The disposal of waste by pumping it below the earth's surface into porous rock formations.