Use the Information for the Question(s)below

question 37

Multiple Choice

Use the information for the question(s) below.
Omicron Industries' Market Value Balance Sheet ($ Millions)
and Cost of Capital Omicron Industries' New Project Free Cash Flows (Millions) Assume that this new project is of average risk for Omicron and that the firm wants to hold constant its debt to equity ratio.
-The NPV for Omicron's new project is closest to:

• A)$23.75 million.
• B)$27.50 million.
• C)$28.75 million.
• D)$24.75 million.

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing the ownership interest of the shareholders.

Stock Warrants

Financial instruments that give the holder the right to purchase the issuer's stock at a specified price before a specified date.

Compensation Expense

Costs associated with the wages, salaries, and benefits provided to employees, recorded on the income statement.

Service Period

The period of time over which employee services are rendered in exchange for an award, common in the context of stock compensation plans.