Consider a Project of the Cornell Haul Moving Company,the Timing

question 84

Multiple Choice

Consider a project of the Cornell Haul Moving Company,the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown below in millions: The firm's tax rate is 34 percent; the firm's bonds trade with a yield to maturity of 8 percent; the current and target debt-equity ratio is 2; if the firm were financed entirely with equity,the required return would be 10 percent. Using the APV method,what is the value of the debt side effects?

• A)$239,072,652.70
• B)$66,891,713.66
• C)$59,459,301.03
• D)$660,000,000

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Definitions:

Micrograph

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