An All-Equity Firm Is Analyzing a Potential Project Which Will

question 171

Multiple Choice

An all-equity firm is analyzing a potential project which will require an initial,after-tax cash outlay of $50,000 and after-tax cash inflows of $6,000 per year for 10 years.In addition,this project will have an after-tax salvage value of $10,000 at the end of Year 10.If the risk-free rate is 6 percent,the return on an average stock is 10 percent,and the beta of this project is 1.50,then what is the project's NPV?

• A) $13,210
• B) $4,905
• C) $7,121
• D) −$6,158
• E) −$12,879

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Definitions:

Champlain

Samuel de Champlain, a French explorer known for founding New France and Quebec City in the early 17th century.

Quebec City

The capital city of the Canadian province of Quebec, known for its rich history and French heritage.

Huron Indians

A large North American Indigenous group, historically located in the Great Lakes region, known for their farming, trading, and strong societal organization.

John Rolfe

An early English settler in Virginia who is credited with the first successful cultivation of tobacco as a cash crop, which significantly influenced the colony's economy.