A Project Costs $14 Million and Is Expected to Produce

question 8

Multiple Choice

A project costs $14 million and is expected to produce cash flows of $4 million a year for
15 years. The opportunity cost of capital is 20%. If the firm has to issue stock to undertake the project and issue costs are $1 million, what is the project's APV?

• A) $3.7 million
• B) $4.5 million
• C) $4.7 million
• D) $3.0 million

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Definitions:

Antimony

A metalloid element with the symbol Sb, used in alloys, fire retardants, and in semiconductor technology.

Elemental Symbol

A notation consisting of letters that represent a chemical element, used in chemical formulas and equations.

Fluorine

A chemical element with the symbol F and atomic number 9, known for its extremely high electronegativity and reactivity.

Elemental Symbol

A one- or two-letter abbreviation used to represent an element on the periodic table, based on its English or Latin name.