A Project Will Give a One-Time Cash Flow of $20,000

question 28

Multiple Choice

A project will give a one-time cash flow of $20,000 after one year.If the project risk requires a return of 10%,what is the levered value of the firm with perfect capital markets?

• A)$18,182
• B)$20,000
• C)$19,000
• D)more information needed

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Definitions:

Time Value

The additional amount of money an investor is willing to pay for an option or bond, above its intrinsic value, due to the time left until expiration.

Actual Call Price

The actual price at which a callable bond or other financial instrument can be redeemed by the issuer before its maturity date.

Intrinsic Value

The inherent, true value of an asset, investment, or company, based on its fundamental characteristics and financial health.

Binomial Value

A value derived from the binomial options pricing model, representing the potential future value of an option based on different paths the underlying asset's price can take.