Ford Motors Expects a New Hybrid-Engine Project to Produce Incremental

question 34

Multiple Choice

Ford Motors expects a new hybrid-engine project to produce incremental cash flows of $100 million each year and expects these to grow at 4% each year.The upfront project costs are $900 million and Ford's weighted average cost of capital is 9%.If the issuance costs for external finances are $10 million,what is the net present value (NPV) of the project?

• A)$1800 million
• B)$1290 million
• C)$1100 million
• D)$1090 million

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Definitions:

Icebergs

Large pieces of freshwater ice that have broken off from a glacier or ice shelf and float in open water.

Glacier

A large, slow-moving mass of ice, formed from compacted snow and slowly flows over land.

Ice

Frozen water, existing in various forms in nature, including snow, glacial ice, and sea ice, playing a critical role in Earth's climate system.

Dense

Having a high degree of compactness or mass per unit volume.