Nielson Motors is considering an opportunity that requires an investment of $1,000,000 today and will provide $250,000 one year from now, $450,000 two years from now, and $650,000 three years from now. If the appropriate discount rate is 10%, then the net present value (NPV) of this opportunity is closestto: A. $87,528.17 B. $100,000.11 C. $96,147.15 D. $90,135.24 Beta The table below shows the information about stock beta and total volatility of four firms. Assume that the risk-free rate of interest is 3% and you estimate the market's expected return to be 996. Which firm has the highest cost of equity capital? Volatility Eenie 0.45 2096 Meenie 0.75 1896 Miney 1.05 3596 Moe 1.20 25% A. Meenie B. Eenie . D. Miney Using the Modigliani-Miller (MM) theory in a perfect market, you want to evaluate a project and how to finance it. The project has free cash flows in one year of $90 in a weak economy or $120 in a strong economy. There is 75% chance that the economy is strong. The initial investment required for the project is $80, and the project's cost of capital is 10%. The risk-free interest rate is 5%. Suppose that to raise the funds for the initial investment, the project is sold to investors as an all-equity firm. For the net present value (NPV) of the project and the market value of the unlevered equity, which of the following statements is correct? A. The NPV is $22.27 and the market value of the unlevered equity is $102.27 B. The NPV is $29.55 and the market value of the unlevered equity is $22.27 The NPV is $22.27 and the market value of the unlevered equity is $22.27 D. The NPV is $29.55 and the market value of the unlevered equity is $102.27 Which of the following statements is false if capital markets have only taxes as the market imperfection? A. There is an optimal capital structure that can maximize firm value Leverage increases firm value Leverage increases the cost of equity D. Leverage reduces the weighted average cost of capital