A Project Will Give a One-Time Cash Flow of $35

question 27

Multiple Choice

A project will give a one-time cash flow of $35 000 after one year. If the project risk requires a return of 11%, what is the levered value of the firm with perfect capital markets?

• A)$31 532
• B)$29 000
• C)$30 000
• D)More information is needed

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Definitions:

Marginal Output

The additional output that results from the use of one more unit of a production input, assuming other inputs are constant.

AVC

Average Variable Cost, the per unit cost of variable inputs divided by the total output produced, indicating the variable cost for each unit of output.

ATC

Stands for Average Total Cost, which is the sum of all production costs divided by the quantity of output produced.

Short Run

A period in economics during which some factors of production are fixed, making it impossible for a business to change major production facilities.