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

question 39

Multiple Choice

Use the following information to answer the question(s) below.
Taggart Transcontinental is considering a $250 million investment to launch a new rail line.The project is expected to generate a free cash flow of $32 million per year,and its unlevered cost of capital is 8%.Taggart's corporate tax rate is 21%.Taggert has 4 million shares of stock outstanding.
-Assume that to fund the investment Taggart will take on $150 million in permanent debt with the remainder of the investment funded through issuance of new equity.Assuming Taggart will incur a 2% (after-tax) underwriting fee on the new debt issue and a 5% underwriting fee on the issuance of new equity,the NPV of Taggart's new rail line is closest to:

• A)$175 million.
• B)$200 million.
• C)$235 million.
• D)$240 million.

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Definitions:

Exciting

Describes experiences, events, or activities that stimulate enthusiasm, interest, or adrenaline in participants or observers.

Daytime Nap

A short period of sleep taken during the day to supplement the main period of sleep taken at night.

Sleeps VERY Soundly

Often used to describe a state of deep and undisturbed sleep.

Quiet Rest

involves a period of low activity and minimal stimulus, promoting relaxation and recuperation, and is often used as a strategy for stress management.