A New Business Will Generate a One-Time Cash Flow of $25,000

question 48

Multiple Choice

A new business will generate a one-time cash flow of $25,000 after one year.The business will be financed with 20% equity and 80% debt.If the firm's unlevered equity cost of capital is 12%,what is the levered value of the firm with perfect capital markets?

• A)$19,882
• B)$22,321
• C)$22,000
• D)$28,000
• E)$23,000

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Definitions:

Ethical Behavior

Acting in ways consistent with what society and individuals typically think are good values, involving fairness, equity, integrity, and respect for others.

Ethical Issues

Moral challenges and dilemmas that arise in a professional setting, requiring careful consideration and decision-making.

Socioeconomic Model

A framework that describes the social and economic systems within a society, detailing how economic activity is structured and how it impacts social relations.

Classical Economic

A school of thought in economics that emphasizes free markets, the role of competition, and the self-regulating nature of markets.