Use the Information for the Question(s)below

question 59

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 strong economy is closest to:

• A)$117,000.
• B)$75,000.
• C)$50,000.
• D)$0.

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Definitions:

Compensatory Behaviors

are actions taken to make up for or to counteract previous behavior, often seen in eating disorders to prevent weight gain.

Vomiting

The forceful emptying of stomach contents through the mouth, which can be a symptom of a wide range of health conditions or a response to certain treatments.

Absorption Of Calories

The process by which nutrients and energy in the form of calories from consumed food are taken up and utilized by the body.

Sustainable Weight Loss

Losing weight in a healthy, gradual manner and maintaining the weight loss over the long term through lifestyle changes and habits.