A firm is considering a project with an initial cost $6,200,000. The project will produce cash...
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A firm is considering a project with an initial cost $6,200,000. The project will produce cash inflows $1,810,000 a year for 5 years. The firm uses the subjective approach to assign discount rates to projects. For this project, the subjective adjustment is +2%. The firm has a pre-tax cost of debt of 5.7% and a cost of equity of 9.4%. The debt- equity ratio is 0.6 and the tax rate is 21%. What is the net present value of the project? O a. $738,504 O b. $790,909 O c. $710,053 O d. $742,067 A firm is considering a project with an initial cost $6,200,000. The project will produce cash inflows $1,810,000 a year for 5 years. The firm uses the subjective approach to assign discount rates to projects. For this project, the subjective adjustment is +2%. The firm has a pre-tax cost of debt of 5.7% and a cost of equity of 9.4%. The debt- equity ratio is 0.6 and the tax rate is 21%. What is the net present value of the project? O a. $738,504 O b. $790,909 O c. $710,053 O d. $742,067
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The detailed answer for the above question is provided below To calculate the net present value NPV of the project we need to discount the expected ca... View the full answer
Related Book For
Principles of managerial finance
ISBN: 978-0132479547
12th edition
Authors: Lawrence J Gitman, Chad J Zutter
Posted Date:
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