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.

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Definitions:

Hegemony

Predominance or influence of one group over others, often seen in political, cultural, or social contexts.

Juxtaposition

The act of placing two or more things side by side for the purpose of highlighting their differences or similarities.

State Society

A form of human social organization characterized by a formal governmental structure and a clear division of society into classes or groups.

Ethnic Group

A group of people forming a community who have similar cultural heritage or ancestry.