Use the Information for the Question(s)below

question 42

Multiple Choice

Use the information for the question(s) below.
Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy,with each outcome being equally likely.The initial investment required for the project is $80,000,and the project's cost of capital is 15%.The risk-free interest rate is 5%.
-Suppose that to raise the funds for the initial investment the firm borrows $40,000 at the risk-free rate and issues new equity to cover the remainder.In this situation,the cash flow that equity holders will receive in one year in a weak economy is closest to:

• A)$90,000.
• B)$0.
• C)$50,000.
• D)$48,000.

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Definitions:

Cell Life Cycle

The series of stages through which a cell passes from one division to the next, including phases such as growth, DNA replication, and mitosis.

Chromosomes Become Visible

This refers to the stage in cell division where chromosomes condense and become visible under a microscope, typically during prophase of mitosis.

Mitosis

A type of cell division that results in two daughter cells each having the same number and kind of chromosomes as the parent nucleus.

Interphase

The phase of the cell cycle in which a cell spends the majority of its time, engaging in growth and DNA replication.