Table 12.3 Tangshan Mining Company Is Considering Investment in One of Two

question 10

Multiple Choice

Table 12.3
Tangshan Mining Company is considering investment in one of two mutually exclusive projects M and N which are described below. Tangshan Mining's overall cost of capital is 15 percent, the market return is 15 percent and the risk-free rate is 5 percent. Tangshan estimates that the beta for project M is 1.20 and the beta for project N is 1.40.
-Using the risk-adjusted discount rate method of project evaluation, the NPV for project N is ________. (See Table 12.3)

• A) $166,132.
• B) $122,970.
• C) $85,732.
• D) none of the above.

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Definitions:

Adaptation

The process by which organisms adjust to changes in their environment in order to survive and reproduce.

Social Readjustment Rating Scale (SRRS)

Holmes and Rahe's measure of stress, which ranks 43 life events from most to least stressful and assigns a point value to each.

Significant Illness

A health condition that has a substantial impact on one's physical, emotional, or social well-being.

Reliance

The dependency on or trust in something or someone for support or maintenance.