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

question 31

Multiple Choice

Use the following information to answer the question(s) below.
Rearden Metal is evaluating a project that requires an investment of $150 million today and provides a single cash flow of $180 million for sure one year from now.Rearden decides to use 100% debt financing for this investment.The risk-free rate is 5% and Rearden's corporate tax rate is 21%.Assume that the investment is fully depreciated at the end of the year.
-The NPV of this project using the WACC method is closest to:

• A)$10 million.
• B)$17 million.
• C)$42 million.
• D)$71 million.

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Definitions:

Percent of Sales Method

A financial planning tool used to forecast future revenues, expenses, or balance sheet figures as a percentage of sales.

Uncollectible Accounts Receivable

Accounts receivable that are considered to be uncollectible due to the inability of the customers to pay.

Journal Entries

Recorded transactions in the accounting system, documenting financial changes in accounts.

Percent of Sales

Percent of sales is a financial analysis tool that helps in estimating how certain accounts, like revenue and expenses, will vary in proportion to changes in sales.