Use Next Year's Cash Flow Forecast for Blank Company to Answer

question 31

Multiple Choice

Use next year's Cash Flow Forecast for Blank Company to answer the following questions:
$\begin{array} { | l | l | } \hline \text { Demand } & \text { Cash Flow } \\\hline \text { Weak } & \$ 25,000 \\\hline \text { Expected } & \$ 35,000 \\\hline \text { Strong } & \$ 45,000 \\\hline\end{array}$
-Suppose Blank Company has only one project, as forecast above, and an unlevered cost of equity of 8%. If the company borrows $10,000 at 5% to make the investment, what is the expected return to equity holders?

• A) 8.0%
• B) 9.33%
• C) 11.6%
• D) 30.0%

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Definitions:

Freudian Concept

A theory or idea originating from the work of Sigmund Freud, focusing on aspects of human psychology such as the unconscious mind, libido, and psychosexual development.

Ego

In psychological terms, a part of the mind that mediates between the conscious and the unconscious and is responsible for reality testing and a sense of personal identity.

Unconscious Motive

A hidden, often irrational force that drives an individual's behavior without their awareness.

Freud's Notion

Refers to the ideas or theories proposed by Sigmund Freud, particularly those related to human psychology, desires, and unconscious motivations.