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

question 38

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.Assume Taggart will incur a 2% underwriting fee on the new debt issue and a 5% underwriting fee on the issuance of new equity.If management believes Taggart's current share price of $25 is $3 less than its true value,then the NPV of Taggart's new rail line is closest to:

• A) $185 million
• B) $195 million
• C) $200 million
• D) $235 million

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Definitions:

Ventral Stream

A pathway in the brain's visual cortex involved in object recognition and form representation.

Temporal Lobes

Regions of the brain located beneath the temples, responsible for processing auditory information and encoding memory.

Primary Visual Cortex

The area within the brain tasked with interpreting visual data, situated in the occipital lobe.

Subtractive Colour Mixing

A process where colors are obtained by the absorption and removal of wavelengths from white light using colored filters or pigments.