Assume General Motors Has a Weighted Average Cost of Capital

question 93

Multiple Choice

Assume General Motors has a weighted average cost of capital of 10%. GM is considering investing in a new plant that will save the company $30 million over each of the first two years, and then $25 million each year thereafter. If the investment is $150 million, what is the net present value (NPV) of the project?

• A) $65.2 million
• B) -$76.1 million
• C) -$86.9 million
• D) $108.7 million

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Definitions:

Tuition Increase

A rise in the fee that institutions of higher education charge students for their courses.

Chi-square Statistic

A statistical measure used in tests of independence and goodness of fit, evaluating how well observed data fit expected frequencies in categorical variables.

Strongly Opposed

A stance or position wherein someone is deeply against or in disagreement with a particular idea or proposal.

Tuition Increase

The rise in the cost of attending a college or university, typically announced on an annual basis.