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

question 43

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 cashflow 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)$555.6 million
• B)$577.8 million
• C)$155.6 million
• D)$177.8 million

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Definitions:

United Nations Charter

A foundational treaty established in 1945 that outlines the principles, structure, and functioning of the United Nations to promote international cooperation and maintain peace.

Race

A social construct that categorizes people based on physical characteristics such as skin color, as well as cultural, historical, and geographical factors.

Human Rights

The basic rights and freedoms that all individuals are entitled to, regardless of nationality, sex, national or ethnic origin, race, religion, language, or other status.

Black Boy

A term sometimes used historically to refer to young African American males, but also the title of an autobiography by Richard Wright detailing African American life in the early 20th century.