1- Consider a project of the Pearson Company. The timing and size of the incremental after-tax...
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1- Consider a project of the Pearson Company. The timing and size of the incremental after-tax cash flows for an all-equity firm are $-2000, $305, $610, $555, $500 from year 0 to 4 respectively. The unlevered cost of equity is 30%. a. Calculate the NPV? Should this project be accepted? b. The firm finances the project with $20000 debt at 11% with $100 after-tax flotation costs. Principal is repaid at $3000 per year with added interest. Pearson's tax rate is 60%. The net present value of the project under leverage? Now, Should this project be accepted? 1- Consider a project of the Pearson Company. The timing and size of the incremental after-tax cash flows for an all-equity firm are $-2000, $305, $610, $555, $500 from year 0 to 4 respectively. The unlevered cost of equity is 30%. a. Calculate the NPV? Should this project be accepted? b. The firm finances the project with $20000 debt at 11% with $100 after-tax flotation costs. Principal is repaid at $3000 per year with added interest. Pearson's tax rate is 60%. The net present value of the project under leverage? Now, Should this project be accepted?
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Here Time Period 4 Years Unlevered Cost of Equity 30 The calculation of the Net Present ... View the full answer
Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Posted Date:
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