A Firm Has a Project with an NPV of -$52

question 30

Multiple Choice

A firm has a project with an NPV of -$52 million.If it has access to risk-free government financing that can create a permanent annual tax shield of $5 million,what is the APV of the project assuming the risk-free interest rate is 6%?

• A)-52 million
• B)$5 million
• C)$31 million
• D)$83 million

---

Definitions:

Operating Assets

Assets that are used by a company in its daily operations to generate revenue, excluding any investment or non-operational assets.

Net Operating Income

The profit derived from a company's regular business activities, excluding deductions of interest and taxes.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.

Residual Income

The net income an investment or business venture generates above the minimum rate of return.