A company has a proposed 2-year project with the cash flows shown below and would like to

Question:

A company has a proposed 2-year project with the cash flows shown below and would like to calculate the NPV of this project so that they can decide whether to pursue the project or not. The company has a target of 60% equity and 40% debt. The beta for this firms stock is 1, the risk-free rate is 4.9, and the expected market risk premium is 6%. The bonds for this company pay interest semiannually and have a interest rate of 8%, 20 years to maturity, a of $1,000, and a current price of 1,148.43. If the corporate tax rate is 39%, what is the NPV of the proposed project for this firm?
Years..................................Cash flows
0................................-4,000
1..................................1, 000
2..................................2, 000
The correct answer is -1,366. Show step by step how I arrive at this answer.
Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...