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

Question

Quizplus · Accepted Answer

The Answer of 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

Suppose That, JMK, Inc