Suppose That, JMK, Inc

question 83

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 just identified a project that will require an initial outlay of $10 million and will return a NPV of $16 million, risk-free. 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:

Design Thinking

A problem-solving approach that involves assessing known aspects of a problem and identifying the more ambiguous or peripheral factors that contribute to the conditions of a problem.

Near Future

A time period that is immediately forthcoming, typically implying changes or events that are expected to happen soon.

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A global design company known for pioneering the concept of design thinking and innovative product development.

Medical Device

Any instrument, apparatus, implement, machine, or software intended by its manufacturer to be used for medical purposes like diagnosis, prevention, monitoring, treatment, or alleviation of disease.