Bread Box, Inc. finances its operations using $1.50 of debt for every $2 of common stock....
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Bread Box, Inc. finances its operations using $1.50 of debt for every $2 of common stock. The pre- tax cost of debt is 7.5 percent, the cost of equity is 11 percent, and the tax rate is 34 percent. Currently, the firm is considering a small project that it considers to be equally as risky as the overall firm. The project has an initial cash outlay of $18,500 and is expected to have a single cash inflow of $25,000 at the end of year two. What is the net present value of this project? Bread Box, Inc. finances its operations using $1.50 of debt for every $2 of common stock. The pre- tax cost of debt is 7.5 percent, the cost of equity is 11 percent, and the tax rate is 34 percent. Currently, the firm is considering a small project that it considers to be equally as risky as the overall firm. The project has an initial cash outlay of $18,500 and is expected to have a single cash inflow of $25,000 at the end of year two. What is the net present value of this project?
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Answer rating: 100% (QA)
To calculate the net present value NPV of the project we need to discount the cash flows at the appr... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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