A Project Costs $7 Million and Is Expected to Produce

question 55

Multiple Choice

A project costs $7 million and is expected to produce cash flows if $2 million a year for
10 years. The opportunity cost of capital is 16%. If the firm has to issue stock to undertake the project and issue costs are $0.5 million, what is the project's APV?

• A) $9.67 million
• B) $2.17 million
• C) $1.67 million
• D) $0.67 million

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Definitions:

Income Distribution

The way in which a country’s total income is divided among its population, affecting economic equity and standard of living.

Gini Ratio

is a measure of income inequality within a population, ranging from 0 to 1, where 0 signifies perfect equality and 1 reflects absolute inequality.

Gini Ratio

A measure of income or wealth distribution within a population, indicating inequality where a higher ratio suggests greater disparity.

Population B

This term on its own lacks context; typically, it would refer to a specific group or subset within a larger population in a study or model.