Assume Ford Motors expects a new hybrid-engine project to produce incremental cash flows of $50 million each year, and expects t
hese to grow at 4% each year. The upfront project costs are $420 million and Ford's weighted average cost of capital is 9%. If the issuance costs for external finances are $20 million, what is the net present value (NPV) of the project?A) $560 million B) $616 million
C) $588 millionD) $504 million
If the reserve requirements tightened, more funds are in reserves and banks do not have as much to lend, leading to an increase in interest rates for customers and a decrease in economic growth.