ATC Has a Value of $98,000 in a Normal Economy

question 40

Multiple Choice

ATC has a value of $98,000 in a normal economy and $87,000 in a recession.The firm has $90,000 of debt.The probability of a recession is 18 percent.The firm is considering a project that would change the firm values to $105,000 in a good economy and $92,000 in a recession.If the firm accepts this project,the firm value will ________ and shareholder value will ________.

• A)decrease by $2,000;decrease by $1,000
• B)increase by $2,000;increase by $2,000
• C)increase by $6,640;increase by $6,100
• D)increase by $12,000;increase by $12,000
• E)increase by $6,640;increase by $6,640

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Definitions:

UCC

The Uniform Commercial Code (UCC) is a set of laws that provide legal standards and regulations for commercial transactions and dealings across the United States.

ATM Machine

An Automated Teller Machine is an electronic banking outlet that allows customers to complete basic transactions without the need for a branch representative.

Safe Harbor Defense

A legal provision that shields companies from liability under certain conditions if they can prove they acted in good faith or complied with specified regulations.

Fees Charged

The costs imposed by a service provider on its clients for the services offered.