A New Business Will Generate a One-Time Cash Flow of $22,000

question 111

Multiple Choice

A new business will generate a one-time cash flow of $22,000 after one year.The business will be financed with 60% equity and 40% debt.If the firm's unlevered equity cost of capital is 11%,what is the levered value of the firm with perfect capital markets?

• A)$18,182
• B)$20,000
• C)$19,820
• D)$24,200
• E)$19,580

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Definitions:

Journal Entry

A record in the books of account that represents a financial transaction.

Payroll Taxes Expense

Taxes that employers are required to pay based on the wages and salaries of their employees, such as Social Security and Medicare taxes.

FICA Tax

A U.S. federal payroll tax used to fund Social Security and Medicare, distributed between employees and employers.

FUTA Tax

A United States federal tax levied on employers to fund state workforce agencies and unemployment benefits.