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:

2-Pentyne

An organic compound belonging to the alkyne family, characterized by a triple bond between two carbon atoms.

Carbon Atoms

The basic building blocks of organic molecules, characterized by having four bonds, either to other carbon atoms or different elements.

Alkene

Hydrocarbons that contain at least one carbon-to-carbon double bond, characterized by the formula CnH2n.

Alkyne

A hydrocarbon with at least one carbon-carbon triple bond, characterized by the general formula CnH2n-2.