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.

---

Definitions:

Apartheid

Was a caste system based on race that existed in South Africa from 1948 until 1992. It consigned the large black majority to menial jobs, prevented marriage between blacks and whites, and erected separate public facilities for members of the two races. Asians and people of “mixed race” enjoyed privileges between these two extremes.

Ethnic Label

A term or descriptor applied to individuals or groups based on their ethnicity, often used to emphasize differences rather than similarities.

Social Necessity

The concept that certain conditions, goods, or services are essential for the functioning and well-being of a society.

Hispanic American

An individual of Latin American descent living in the United States, contributing to the cultural and demographic diversity of the country.