Use the Following Information to Answer the Question(s)below

question 10

Multiple Choice

Use the following information to answer the question(s) below.
Rearden Metal can invest in a risk-free technology that requires an up-front investment of $1 million.Rearden's managers are hesitant to invest because of uncertainty over future interest rates.Suppose that all interest rates will be either 8% or 4% in one year and remain there forever.The risk-neutral probability that interest rates will drop to 4% is 40%.The one-year risk-free interest rate is 5% and today's rate on a risk-free perpetual bond is 6%.The rate on an equivalent perpetual bond that is repayable at any time (the callable annuity rate) is 7.65%.
-Assuming that this project will provide Rearden with perpetual annual cash flows of $65,000,the NPV of investing in the project next year is closest to:

• A)-$281,000.
• B)+$46,000.
• C)+$83,000.
• D)+$143,000.
• E)+$238,000.

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Definitions:

Sculptural Works

Art pieces created by shaping or combining hard materials - traditionally stone, metal, ceramics - into three-dimensional art objects.

La Pittura

An Italian term for painting, often used to reference the Renaissance movement and its focus on advancing art techniques and realism.

Artemesia Gentileschi

A prominent female painter of the Baroque period, known for her powerful depictions of biblical and mythological female figures.

Cesare Ripa

An Italian iconographer known for his influential book "Iconologia," which provided a comprehensive collection of emblematic figures and allegories.