Use the Information for the Question(s) Below

question 21

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 you borrow only $30,000 in financing the project.According to MM Proposition II,the firm's equity cost of capital will be closest to:

• A) 21%
• B) 15%
• C) 20%
• D) 25%

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Definitions:

Haloperidol

A medication used to treat schizophrenia, acute psychosis, and to control tics and vocal utterances of Tourette syndrome.

Neurotransmitter Dopamine

A chemical in the brain that plays a major role in reward-motivated behavior and pleasure.

Neuroleptic Drug

A class of medication primarily used to treat psychosis, including schizophrenia and bipolar disorder, also known as antipsychotic drugs.

Schizophrenia

A complex, long-term medical disorder that affects how a person thinks, feels, and behaves, characterized by delusions, hallucinations, and other cognitive difficulties.