Syntax Tar Sand Inc

question 128

Multiple Choice

Syntax Tar Sand Inc.,a Canadian company,has an opportunity to invest in Peru.The project requires an immediate cash outlay of $3 million and is expected to provide after-tax cash flows of $800,000 in year 1,$1,000,000 in year 2,$1,200,000 in year 3,and $1,600,000 in year 4.The appropriate discount rate for a similar project in Canada is 12 percent.The risks of implementing such a project in Peru will require a risk premium of 4 percent.What will be the impact on the shareholder value of Syntax if the firm undertakes this project in Peru?

• A) Increase by $85,273
• B) Increase by $382,445
• C) Increase by $3,085,273
• D) Increase by $3,382,445

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