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:

Patriline

A system of lineage or inheritance in which descent and inheritance rights are passed through the father's line.

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The father of one's father, a direct male ancestor on the paternal side.

Maori Ancestry

The heritage or lineage of the Maori people, the indigenous Polynesian inhabitants of New Zealand.

Maori

The Indigenous Polynesian people of mainland New Zealand, known for their rich culture and history.