The Bakery Is Considering a New Project It Considers to Be

question 52

Multiple Choice

The Bakery is considering a new project it considers to be a little riskier than its current operations.Thus,management has decided to add an additional 1.5 percent to the company's overall cost of capital when evaluating this project.The project has an initial cash outlay of $58,000 and projected cash inflows of $17,000 in year one,$28,000 in year two,and $30,000 in year three.The firm uses 25 percent debt and 75 percent common stock as its capital structure.The company's cost of equity is 15.5 percent while the aftertax cost of debt for the firm is 6.1 percent.What is the projected net present value of the new project?

• A)-$6,208
• B)-$1,964
• C)-$308
• D)$1,427
• E)$1,573

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Definitions:

Algorithms

A step-by-step procedure or set of rules to be followed in calculations or problem-solving operations, especially by a computer.

Mechanical

Pertaining to objects, machines, or systems that operate or are produced by machinery and physical parts, often contrasted with electronic or digital.

Repetitive Mathematical Procedures

Algorithms or operations that are performed repeatedly, often to solve problems or accomplish tasks in mathematics.

Heuristic

A strategy or method used in problem-solving or decision-making that employs a practical approach based on experience and immediate judgment rather than a strict or formal process.