Assume Ford Motors Expects a New Hybrid-Engine Project to Produce

question 84

Multiple Choice

Assume Ford Motors expects a new hybrid-engine project to produce incremental cash flows of $90 million each year and expects these to grow at 3% each year. The upfront project costs are $900 million and Ford's weighted average cost of capital is 9%. If the issuance costs for external finances are $20 million, what is the net present value (NPV) of the project?

• A) $986 million
• B) $696 million
• C) $609 million
• D) $580 million

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Definitions:

1930s

A decade characterized by the Great Depression, major economic downturns, and significant advancements in technology and culture.

Non-servo

Relates to a system or mechanism that does not use servos or automatic feedback for control, often relying on manual operation.

Leading-Trailing Brakes

A nonservo type of drum brake in which the shoe anchor is at the bottom of the backing plate; when the brakes are applied, no additional force from the leading shoe can be applied to the trailing shoe.

Anchor

In a drum brake, a fixture used to minimize twisting forces on the brake shoes as the brakes are applied.