Alpha Industries Is Considering a Project with an Initial Cost

question 43

Multiple Choice

Alpha Industries is considering a project with an initial cost of $7.4 million.The project will produce cash inflows of $1.54 million a year for seven years.The firm uses the subjective approach to assign discount rates to projects.For this project,the subjective adjustment is +1.5 percent.The firm has a pretax cost of debt of 8.6 percent and a cost of equity of 13.7 percent.The debt-equity ratio is 0.0.65 and the tax rate is 35 percent.What is the net present value of the project?

• A)-$372,951
• B)-$187,016
• C)$48,209
• D)$133,333
• E)$269,480

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Definitions:

Job Performance

The effectiveness and efficiency with which an employee carries out their tasks, duties, and responsibilities at work.

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Results pertaining to emotional growth, such as changes in attitudes, values, and feelings, resulting from educational or training interventions.

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