The following is the adjusted trial balance data for Emma's Alterations as of December 31, 20 Emma's Alterations Adjusted Trial Balance Year Ended December 31, 2019 Debit Credit Cash $600,538 Accounts Receivable 51,689 Equipment 199,430 Merchandise Inventory 171,744 Accounts Payable $236,893 Common Stock 502,200 Sales 396,893 Interest Revenue 100,976 Rent Revenue 65,100 Sales Salaries Expense 27,250 Office Supplies Expense 6,103 Sales Discounts 61,347 Interest Expense 3,570 Sales Returns and Allowances 55,632 Cost of Goods Sold 90,300 Rent Expense 10,600 Depreciation Expense-Office Equipment 8,560 Insurance Expense 3,421 Advertising Expense 11,878 Totals $1,302,062 $1,302,062

Problem 9-25 Fudge factors An oil company executive is considering investing $10.1 million in one or both of two wells: well 1 is expected to produce oil worth $3.01 million a year for 10 years; well 2 is expected to produce $2.01 million for 15 years. These are real (inflation-adjusted) cash flows. The beta for producing wells is 0.91. The market risk premium is 9%, the nominal risk-free interest rate is 7%, and expected inflation is 3%. The two wells are intended to develop a previously discovered oil field. Unfortunately there is still a 21% chance of a dry hole in each case. A dry hole means zero cash flows and a complete loss of the $10.1 million investment. Ignore taxes and make further assumptions as necessary. a. What is the correct real discount rate for cash flows from developed wells? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Real discount rate b. The oil company executive proposes to add 20 percentage points to the…

Choose the letter of the correct answer.

please explain the answer B ?