A Firm Is Considering Investing in a New Project with an Upfront

question 85

Multiple Choice

A firm is considering investing in a new project with an upfront cost of $400 million.The project will generate an incremental free cash flow of $50 million in the first year and this cash flow is expected to grow at an annual rate of 4% forever.If the firm's WACC is 13%,what is the value of this project?

• A)$155.6 million
• B)$555.6 million
• C)$577.8 million
• D)$177.8 million
• E)$181.4 million

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Definitions:

Straight Voting

A method of voting in corporate elections where shareholders must vote for directors individually, allocating one vote per share owned to each board candidate.

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Zero Growth Model

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