High Roller Properties Is Considering Building a New Casino at a Cost

question 35

Multiple Choice

High Roller Properties is considering building a new casino at a cost of $10 million at t = 0.The after-tax cash flows the casino generates will depend on whether the state imposes a new income tax,and there is a 50-50 chance the tax will pass.If it passes,after-tax cash flows will be $1.875 million per year for the next 5 years.If it doesn't pass,the after-tax cash flows will be $3.75 million per year for the next 5 years.The project's WACC is 11.0%.If the tax is passed,the firm will have the option to abandon the project 1 year from now,in which case the property could be sold to net $6.5 million after tax at t = 1.What is the value (in thousands) of this abandonment option?

• A)$202
• B)$224
• C)$249
• D)$277
• E)$308

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Definitions:

Client-centered Therapists

A therapeutic approach developed by Carl Rogers where therapists create a supportive environment, emphasizing the importance of being understanding, accepting, and genuine towards clients.

Genuinely Express

Involves conveying thoughts, feelings, or emotions in a sincere, authentic manner without pretense or deception.

Psychodynamic Therapy

A therapeutic approach that explores how unconscious processes manifested in a person's present behavior, with an emphasis on understanding past experiences, emotional states, and inner conflicts.

Adversarial Stance

A position of opposition or conflict in which parties see each other as opponents or enemies, often found in legal, political, or social contexts.