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

question 86

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%.
-Assume that to fund the investment Taggart will take on $150 million in permanent debt with the remainder of the investment funded through issuance of new equity.Assuming Taggart will incur a 2% underwriting fee on the new debt issue and a 5% underwriting fee on the issuance of new equity,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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Definitions:

Wheel Base

The distance between the centers of the front and rear wheels of a vehicle, influencing stability, handling, and ride comfort.

Linehaul

Truck transports that operate terminal to terminal. Refers to a truck that operates mainly on major highways.

Terminal

A begin, an end, or a connection point in an electrical circuit.

Air Suspension

A type of vehicle suspension system powered by air compressors or springs, providing a smoother ride by adjusting to varying load conditions and road surfaces.