Use the Information for the Question(s) Below

question 38

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 $60,000 in financing the project.According to MM proposition II,the firm's equity cost of capital will be closest to:

• A) 45%
• B) 30%
• C) 25%
• D) 35%

---

Definitions:

African-Americans

A racial or ethnic group in the United States with ancestry from any of the black racial groups of Africa.

Grievances

Complaints or formal expressions of dissatisfaction, often against an authority or institution.

Myra Bradwell

A pioneering woman in the legal profession, Bradwell was an American publisher and political activist in the 19th century, known for her efforts in women's rights, especially in legal education and practice.