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

question 95

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 corporate tax rate is 21%.Taggert has 4 million shares of stock outstanding.
-Assuming that to fund the investment Taggart will take on $250 million in permanent debt and ignoring issuance costs,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:

Negotiable Instrument

A document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payer named on the document.

Signature Liability

Liability that is attributed because of a party’s signature on an instrument.

Warranty

(1) An assurance, either express or implied, by one party that the other party can rely on its representations of fact. (2) In sales, a binding promise regarding a product in the event that the product does not meet the manufacturer's or seller's promises.

Proper Tender

The act of presenting an exact amount of money in the appropriate form as payment for a debt or obligation.