Use the Following Information to Answer the Question(s) Below

question 21

Multiple Choice

Use the following information to answer the question(s) below.
Taggart Transcontinental is considering a $250 million investment to launch a new rail line. The project is expected to generate a free cash flow of $32 million per year, and its unlevered cost of capital is 8%. Taggart's marginal corporate tax rate is 35%.
-Assuming that to fund the investment Taggart will take on $250 million in permanent debt and assuming Taggart will incur a 2% underwriting fee on the new debt issue,the NPV of Taggart's new rail line is closest to:

• A) $195 million
• B) $200 million
• C) $235 million
• D) $240 million

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