Your Firm Has an Average-Risk Project Under Consideration A)$914,675
B)$98,415
C)$64,675
D)$48,415

question 5

Multiple Choice

Your firm has an average-risk project under consideration.You choose to fund the project in the same manner as the firm's existing capital structure.If the cost of debt is 8.50%,the cost of preferred stock is 9.00%,the cost of common stock is 11.50%,and the WACC adjusted for taxes is 10.50%,what is the NPV of the project,given the expected cash flows listed here? $$\begin{array} { | l | c | c | c | c | } \hline \text { Category } & \mathrm { T } _ { 0 } & \mathrm {~T} _ { 1 } & \mathrm {~T} _ { 2 } & \mathrm {~T} _ { 3 } \\\hline \text { Investment } & - \$ 800,000 & & & \\\hline \text { NWC } & - \$ 50,000 & & & \$ 50,000 \\\hline \text { Operating Cash Flow } & & \$ 350,000 & \$ 350,000 & \$ 350,000 \\\hline \text { Salvage } & & & & \$ 20,000 \\\hline \text { Total Incremental Cash Flow } & - \$ 850,000 & \$ 350,000 & \$ 350,000 & \$ 420,000 \\\hline\end{array}$$

• A)$914,675
• B)$98,415
• C)$64,675
• D)$48,415

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Definitions:

Statistics

The science of collecting, analyzing, interpreting, and presenting data.

Mathematics

The abstract science of number, quantity, and space, either as abstract concepts (pure mathematics) or as applied to other disciplines such as physics and engineering (applied mathematics).

Conclusive Cause and Effect Relationship

A relationship where changes in one variable result in changes in another, with no alternative explanation.

Descriptive/Correlational Research

A research method that involves observing and measuring phenomena to describe them and assess relationships between variables without manipulating them.