Use the Information for the Question(s)below

question 31

Multiple Choice

Use the information for the question(s) below.
Iota Industries is an all-equity firm with 50 million shares outstanding.Iota has $200 million in cash and expects future free cash flows of $75 million per year.Management plans to use the cash to expand the firm's operations,which in turn will increase future free cash flows by 12%.Iota's cost of capital is 10% and assume that capital markets are perfect.
-The NPV of Iota's expansion project is closest to:

• A)-$110 million.
• B)-$137.5 million.
• C)$0.
• D)$75 million.

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Definitions:

Stereotypes

Widely held but fixed and oversimplified images or ideas of a particular type of person or thing, which often do not reflect reality.

Self-Fulfilling Prophecies

Expectations about a situation or person that lead to behaviors which cause the expectation to come true.

Cognitive Dissonance

A psychological concept describing the discomfort felt when holding conflicting cognition, beliefs, or values, prompting individuals to seek consistency.

Festinger

Leon Festinger was a social psychologist known for the theory of cognitive dissonance, which describes the discomfort felt when holding conflicting beliefs or values.