Use the Information for the Question(s)below

question 89

Multiple Choice

Use the information for the question(s) below.
Shepard Industries expects free cash flow of $10 million each year.Shepard's corporate tax rate is 21%,and its unlevered cost of equity is 10%.The firm also has outstanding debt of $40 million and it expects to maintain amount of debt permanently.
-The value of Shepard Industries without leverage is closest to:

• A)$114 million.
• B)$50 million.
• C)$100 million.
• D)$64 million.

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Definitions:

Convergence

The act of moving toward union or uniformity; in terms of visual perception, it refers to the inward movement of the eyes toward each other when focusing on a close object.

Motion Parallax

A depth cue that involves images of objects at different distances moving across the retina at different rates when the observer is in motion.

Relative Size

A perceptual cue that allows the interpretation of the size of an object in comparison to another, contributing to depth perception.

Texture Gradient

A visual cue that refers to the gradual reduction of detail that occurs in surfaces as they recede from the observer, contributing to the perception of depth.