Use the Information for the Question(s)below

question 59

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 $40,000 at the risk-free rate and issues new equity to cover the remainder.In this situation,the cash flow that equity holders will receive in one year in a strong economy is closest to:

• A)$117,000.
• B)$75,000.
• C)$50,000.
• D)$0.

---

Definitions:

Fear of Rejection

A common psychological condition where individuals experience intense apprehension or anxiety about being refused, dismissed, or deemed unworthy by others.

Criticism

The act of expressing disapproval and noting the problems or faults in something or someone.

Illness Anxiety Disorder

A psychological disorder characterized by excessive concern about having a serious illness, despite medical tests showing no evidence of such illness.

Tickling Sensation

A complex sensory response to light touch or stroking, often resulting in involuntary laughter or movements to avoid the stimulus.