Assume General Motors Has a Weighted Average Cost of Capital

question 43

Multiple Choice

Assume General Motors has a weighted average cost of capital of 9%. GM is considering investing in a new plant that will save the company $20 million over each of the first two years, and then $10 million each year thereafter. If the investment is $100 million, what is the net present value (NPV) of the project?

• A) $25.8 million
• B) $31.6 million
• C) $28.7 million
• D) $27.3 million

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Definitions:

Opposite

Being in a position on the other side; facing something, especially something of the same type or a corresponding part.

Leaf Arrangement

The pattern or configuration in which leaves are distributed on the stem of a plant.

Node

A point in a plant where leaves, branches, or stems originate.

Trichomes

Hair-like outgrowths on the epidermis of plants, serving various functions such as reducing water loss and providing protection against herbivores.