The Norris Co

question 7

Multiple Choice

The Norris Co. has an improved version of its hotel stand. The investment cost is expected to be $72 million and will return $13.5 million for 5 years in net cash flows. The ratio of debt to equity is 1 to 1. The cost of equity is 13%,the cost of debt is 9%,and the tax rate is 34%. The appropriate discount rate,assuming average risk,is:

• A) 8.65%
• B) 9%
• C) 9.47%
• D) 10.5%
• E) 13%

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Definitions:

Persuasive Communication

The ability to convince or influence others through effective messaging and communication techniques.

Logical Reasoning

Persuasive techniques that appeal to the prospect’s common sense by applying logic through reason.

Straightforward

something characterized by clarity, simplicity, and easiness to understand or do, without complexity or ambiguity.

Autosuggestion

A psychological technique involving self-induced suggestions to change behavior or improve performance by influencing the subconscious mind.