Use the Information for the Question(s)below

question 72

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 value of the firm's levered equity from the project is closest to:

• A)$0.
• B)$50,000.
• C)$90,000.
• D)$40,000.

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Definitions:

Voice Portals

Automated telephone systems that allow users to access information and perform transactions using speech recognition and voice commands.

Flight Status

Information about the progress of an aircraft's flight, including times of departure and arrival, as well as any delays or cancellations.

Wireless System

Technology enabling the transmission of data over distances without the need for wires or cables, using electromagnetic waves.

Satellites

Man-made objects placed in orbit around the Earth or other celestial bodies, used for communication, navigation, or observation.