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

question 11

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 3% forever. If the firm's WACC is 12%, what is the value of this project?

• A) $155.6 million
• B) $555.6 million
• C) $583.3 million
• D) $183.3 million

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Definitions:

Obsessional Thinking

A form of intrusive thought that is unwanted, persistent, and often linked to anxiety or OCD.

Intellectual Functioning

Refers to the cognitive capacities of an individual, including abilities such as reasoning, problem-solving, and learning.

Presenting Problem

The initial issue or concern as reported by a client or patient that leads them to seek professional help or counseling.

Referral

The process of directing someone to another professional or service for additional expertise or treatment.