Joshua Industries Is Considering a New Project with Revenue of $478,000

question 14

Multiple Choice

Joshua Industries is considering a new project with revenue of $478,000 for the indefinite future.Cash costs are 68 percent of the revenue.The initial cost of the investment is $685,000.The tax rate is 21 percent and the unlevered cost of equity is 14.2 percent.The firm is financing $200,000 of the project cost with debt.What is the adjusted present value of the project?

• A)$202,429
• B)$198,311
• C)$207,975
• D)$232,408
• E)$225,941

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Definitions:

Utility Maximization

Utility Maximization is the economic principle that individuals or firms seek to achieve the highest satisfaction or benefit from their resources.

Marginal Utility

The extra contentment or usefulness experienced by consuming one more unit of a good or service.

Utility Maximization

The process by which individuals allocate their resources to maximize their satisfaction or utility.

Marginal Utility

The added gratification or usefulness experienced by a buyer when they consume an additional unit of a good or service.