Panelli's Is Analyzing a Project with an Initial Cost of $110,000

question 86

Multiple Choice

Panelli's is analyzing a project with an initial cost of $110,000 and cash inflows of $65,000 in year one and $74,000 in year two.This project is an extension of the firm's current operations and thus is equally as risky as the current firm.The firm uses only debt and common stock to finance its operations and maintains a debt-equity ratio of 0.45.The aftertax cost of debt is 4.8 percent,the cost of equity is 12.7 percent,and the tax rate is 35 percent.What is the projected net present value of this project?

• A)$7,411
• B)$7,809
• C)$8,333
• D)$8,938
• E)$9,840

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Definitions:

"You" Attitude

A communication style that focuses on the needs, interests, and concerns of the audience, rather than the speaker.

Credibility

The quality of being trusted, believable, or convincing based on one's knowledge, reliability, or reputation.

Pompous Language

The use of overly self-important or grandiose language intended to impress others.

Establishing Qualifications

The process of presenting and verifying credentials, skills, and experiences that make an individual suitable for a particular role or task.