Use the Information for the Question(s)below

question 89

Multiple Choice

Use the information for the question(s) below.
Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy,with each outcome being equally likely.The initial investment required for the project is $80,000,and the project's cost of capital is 15%.The risk-free interest rate is 5%.
-The NPV for this project is closest to:

• A)$6250.
• B)$14,100.
• C)$10,000.
• D)$18,600.

---

Definitions:

Decentralization

The distribution of decision-making power and assignment of management and operational duties away from a central authoritative location or group.

Operational Issues

Challenges or problems that arise in the day-to-day functions of a business, affecting its operations.

Transfer Prices

Prices at which goods and services are sold between departments within the same company or between affiliated companies.

Market Price Approach

A valuation method that estimates the value of a good, service, or asset based on the current market price of comparable items.