Use the Information for the Question(s)below

question 49

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%.
-Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk-free rate,then the cash flow that equity holders will receive in one year in a weak economy is closest to:

• A)$6000.
• B)$10,000.
• C)$0.
• D)$33,000.

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Definitions:

Bradycardia

A slower than normal heart rate, which can be a sign of a well-conditioned heart in athletes or an indicator of potential health issues.

Tachycardia

A condition characterized by an abnormally fast heart rate, typically over 100 beats per minute in adults.

Arrhythmia

An irregular or abnormal heartbeat rhythm, which can vary from being merely bothersome to life-threatening.

Axillary

Pertaining to the armpit area, often referring to the location of lymph nodes or the measurement of body temperature.