Use the Following Information to Answer the Question(s)below

question 10

Multiple Choice

Use the following information to answer the question(s) below.
Rearden Metal can invest in a risk-free technology that requires an up-front investment of $1 million.Rearden's managers are hesitant to invest because of uncertainty over future interest rates.Suppose that all interest rates will be either 8% or 4% in one year and remain there forever.The risk-neutral probability that interest rates will drop to 4% is 40%.The one-year risk-free interest rate is 5% and today's rate on a risk-free perpetual bond is 6%.The rate on an equivalent perpetual bond that is repayable at any time (the callable annuity rate) is 7.65%.
-Assuming that this project will provide Rearden with perpetual annual cash flows of $65,000,the NPV of investing in the project next year is closest to:

• A)-$281,000.
• B)+$46,000.
• C)+$83,000.
• D)+$143,000.
• E)+$238,000.

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Definitions:

Hematopoiesis

The process of creating new blood cells in the body, occurring in the bone marrow.

Antibodies

Proteins produced by the immune system to neutralize or destroy foreign substances like bacteria and viruses.

Immune Function

The activities performed by the immune system to protect the body against disease-causing organisms and substances.

Antigens

Substances that the immune system recognizes as foreign or dangerous, eliciting an immune response, often found on pathogens or produced by them.