Suppose That JMK, Inc

question 46

Multiple Choice

Suppose that JMK, Inc. has debt with a face value of $100 million and assets worth $70 million. The firm's management has identified a risk-free project that will require an initial outlay of $10 million and will return a NPV of $16 million. The firm currently has no cash. What would be the net return to stockholders if they took on this project?

• A) −$10 million
• B) $0 million
• C) $26 million
• D) $70 million

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Definitions:

Possible Selves

Images of what the self might become in the future.

Trait Self-Esteem

The enduring sense of worth or value that one attributes to oneself as a consistent aspect of their personality.

Self-Verification

The desire to be understood and recognized by others according to one's firmly held beliefs and feelings about oneself.

Self-Handicapping

A cognitive strategy by which people avoid effort in the hopes of keeping potential failure from hurting self-esteem.