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

question 4

Multiple Choice

Use the following information to answer the question(s) below.
d'Anconia Copper has $200 million in cash that it can use for a share repurchase.Suppose instead that d'Anconia Copper invests the funds in an account paying 5% interest for one year.Assume that the corporate tax rate is 21%,the individual capital gains rate is 15% and the individual rate on ordinary income is 32%.
-Net of ordinary income taxes,the amount that investors would have if they invested the $200 million on their own is closest to:

• A)$5.5 million.
• B)$6.5 million.
• C)$6.8 million.
• D)$10.0 million.

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Definitions:

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Cash Outflow

Payments or expenditures of cash, representing the movement of cash out of a business for expenses, investments, or acquisitions.

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in capital budgeting and investment planning.

Original Investment

The initial amount of money used to purchase an asset or start an investment.