A Project Costs $14 Million and Is Expected to Produce

question 75

Multiple Choice

A project costs $14 million and is expected to produce cash flows of $4 million per year for 15 years. The opportunity cost of capital is 20 percent. If the firm has to issue stock to undertake the project and issue costs are $1 million, what is the project's APV?

• A)$3.7 million
• B)$4.5 million
• C)$4.7 million
• D)$3 million

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Definitions:

Null Hypothesis

A statement positing no difference or no effect, which researchers aim to test against the alternative hypothesis.

One-way ANOVA

A statistical test that compares the means of three or more independent groups to determine if there is a significant difference among them based on one independent variable.

Midwest

A geographical region in the United States that is generally considered to include the north-central states.

Alternative Hypothesis

The hypothesis that proposes a significant difference or relationship between variables, opposite to the null hypothesis.