Beta Industries Is Considering a Project with an Initial Cost

question 14

Multiple Choice

Beta Industries is considering a project with an initial cost of $6.9 million.The project will produce cash inflows of $1.52 million a year for seven years.The firm uses the subjective approach to assign discount rates to projects.For this project, the subjective adjustment is +2.2 percent.The firm has a pretax cost of debt of 9.1 percent and a cost of equity of 17.7 percent.The debt-equity ratio is .57 and the tax rate is 34 percent.What is the net present value of the project? (Round the answer to the nearest $100.)

• A)-$698,400
• B)-$187,100
• C)$48,200
• D)$333,300
• E)$2,500

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