Use the Information for the Question(s)below

question 72

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 value of the firm's levered equity from the project is closest to:

• A)$0.
• B)$50,000.
• C)$90,000.
• D)$40,000.

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Definitions:

Poverty Rate

The proportion of the population living below the poverty line, indicating how many individuals live in economically insufficient conditions.

Welfare Reform

Changes in the public policy and legislation aimed at improving the efficiency and effectiveness of welfare programs.

Homeless Americans

Individuals living within the United States who lack fixed, regular, and adequate nighttime residence, reflecting a condition of lack or instability of housing.

Retirees Living In Poverty

Describes elderly individuals who receive insufficient income from pensions or savings to meet basic living costs.