Table 11.8 Tangshan Mining Company Is Considering Investment in One of Two

question 93

Multiple Choice

Table 11.8
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 M is ________.(See Table 11.8)

• A)$156,494
• B)$122,970
• C)$85,732
• D)$500,000

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Definitions:

Comparative Financial Statement

Comparative financial statements present the financial position and results of operations for a business across multiple periods, allowing for analysis of trends and financial performance over time.

Base Period

A specific time period against which conditions in other time periods are compared, often used in index numbers or to measure economic growth.

Estimated Period

A time frame within which certain financial projections or the useful life of an asset is expected to occur.

Vertical Analysis

A financial method that expresses each item in a financial statement as a percentage of a base figure from the same statement, typically used for income statements and balance sheets.