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

question 67

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 3; 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:

Agency Relationship

A legal relationship in which one party, the agent, acts on behalf of another party, the principal, in business transactions.

Sole Proprietorship

A business structure in which a single individual owns and operates the business, bearing full responsibility for its debts and obligations.

Employer-Employee

The legal relationship between a person who hires and pays another to perform specific duties, typically guided by a contract or agreement.

Partners

Individuals who share ownership of a legal entity or business, often sharing profits, losses, and managerial responsibilities.