Al's Market Plans to Close After 3 More Years

question 12

Multiple Choice

Al's Market plans to close after 3 more years.The firm expects to have free cash flows of $148,000 next year,$128,000 in Year 2,and $65,000 in Year 3 after incurring the costs of closing.The firm's cost of equity is 15.5% and its after-tax cost of debt is 6.2%.What is the present value of the firm if its debt to value ratio is 30%?

• A) $312,020
• B) $248,915
• C) $277,467
• D) $301,004

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Definitions:

Limbic System

A sophisticated network of nerves and pathways in the brain, situated around the cortex's periphery, responsible for instincts and emotions. It governs fundamental feelings and motivations.

Addictive Disorders

A broad range of disorders that involve a compulsive need to use substances or engage in behaviors despite negative consequences.

Malfunctioning Reward Centers

A condition where the brain's reward system, which motivates behavior by releasing dopamine, does not work properly, leading to issues like addiction or depression.

Thalamus

A brain structure involved in sensory and motor signal relay and the regulation of consciousness and sleep.