Use the Information for the Question(s)below

question 48

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 firm borrows $80,000 at the risk-free rate,then the cash flow that equity holders will receive in one year in a strong economy is closest to:

• A)$0.
• B)$6000.
• C)$33,000.
• D)$10,000.

---

Definitions:

Quality Conscious

Being aware of and giving importance to the quality of products, services, or work, often striving to maintain or improve it.

Competitive Advantage

A condition or circumstance that puts a company in a favorable or superior business position.

Organisational Cultures

The shared values, beliefs, and norms that influence the way employees think, feel, and behave within an organization, shaping its social and psychological environment.

Learning Organisation

An organization that promotes a culture of continuous learning, adaptability, and innovation among its employees and processes.