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

question 1

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:

Alliance For Progress

An initiative launched by U.S. President John F. Kennedy in 1961 aimed at establishing economic cooperation between North and South America.

Communism

A political and economic ideology advocating for a classless society in which all property and wealth are communally owned, ideally eliminating personal ownership and class divisions.

U.S. Assistance

Encompasses various forms of help provided by the United States to other countries, including economic aid, military support, and humanitarian relief.

Local Elites

Individuals or groups within a specific area who possess a significant amount of social, economic, or political power.