Your Company Is Considering a Project That Will Cost $100

question 49

Multiple Choice

Your company is considering a project that will cost $100. The project will generate after-tax cash flows of $37.50 per year for five years. The WACC is 10 percent and the firm's D/A ratio is 0.70. The flotation cost for equity is 6 percent, the flotation cost for debt is 3 percent, and your firm does not plan on issuing any preferred stock within its capital structure. If your firm follows the practice of incorporating flotation costs into the project's initial investment, what is the firm's flotation-adjusted cash flow in year 0?

• A)(-$90.16)
• B)(-$104.06)
• C)(-$96.25)
• D)(-$102.72)

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Definitions:

Archetypes

Universal, inherited models of people, behaviors, or personalities present in the collective unconscious, as identified by Carl Jung.

Extraverted Intuiting Type

A personality type in Jungian psychology characterized by a preference for focusing on possibilities, external data, and abstract understanding through intuition.

Pleasure

A feeling of satisfaction or joy, often pursued as a goal in various human behaviors.

New Experiences

Exposures or interactions with situations, places, or activities that are novel to an individual, often contributing to personal growth and knowledge.