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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 you borrow $60,000 in financing the project.According to MM proposition II,the firm's equity cost of capital will be closest to:
Prejudice
Preconceived opinion not based on reason or actual experience; bias or discrimination against certain groups.
Stereotypes
Oversimplified generalizations about groups of people that may lead to assumptions and judgments without regard for individual differences.
Stereotype
A widely held but fixed and oversimplified image or idea of a particular type of person or thing.
Ethnocentrism
The belief that one’s ethnic group is more normal than others; an emotional source of prejudice because of people’s gut-level feelings about how right their group is—and, in turn, how wrong they think other groups are.
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