Bertelli's Is Analyzing a Project with an Initial Cost of $55,000

question 47

Multiple Choice

Bertelli's is analyzing a project with an initial cost of $55,000 and cash inflows of $33,000 a year for two years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of.35. The after-tax cost of debt is 6 % and the cost of equity is 11 %. The tax rate is 34 %. What is the projected net present value of this project?

• A) $2,501
• B) $2,854
• C) $2,913
• D) $3,011
• E) $3,418

---

Definitions:

SEC

Short for the Securities and Exchange Commission, a U.S. federal agency responsible for regulating the securities industry and enforcing federal securities laws.

Food Stamps

A governmental assistance program providing low-income individuals and families with funds to purchase groceries, aiming to improve nutrition and alleviate food insecurity.

Medicare

A federal health insurance program in the United States for people who are 65 years of age or older, certain younger people with disabilities, and people with End-Stage Renal Disease.

Medicaid

A government insurance program for individuals and families with low income and resources, providing health coverage in the United States.