Use the Information for the Question(s)below

question 59

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 $40,000 at the risk-free rate and issues new equity to cover the remainder.In this situation,the cash flow that equity holders will receive in one year in a strong economy is closest to:

• A)$117,000.
• B)$75,000.
• C)$50,000.
• D)$0.

---

Definitions:

Marginal Listening

A form of listening where the listener only partially focuses on the speaker's message, often missing key points or details.

Appliance Salesperson

A professional who specializes in selling household machines and equipment, often providing advice on products to fit customers' needs.

Routine Listening

The process of regularly paying attention to and understanding auditory information during everyday activities.

Marginal Listening

A type of listening where the listener pays minimal attention and provides little feedback, often missing important details in the communication.