Use the Information for the Question(s)below

question 86

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 project is sold to investors as an all-equity firm.The equity holders will receive the cash flows of the project in one year.The market value of the unlevered equity for this project is closest to:

• A)$94,100.
• B)$90,000.
• C)$86,250.
• D)$98,600.

---

Definitions:

Market-Product Grid

A tool used to identify and understand market segments and product offerings, facilitating strategic decisions.

Multiple Products

Offering a range of different goods or services within a business's portfolio to cater to various customer preferences or market segments.

Multiple Market Segments

The practice of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups with similar needs or characteristics.

Geographic Markets

Market segments defined by geographic areas where customers share similar needs and characteristics.