Suppose there is an investment proposal requiring $16,000 outlay NOW (time zero) and returning a constant cash flow of $7,000 per period before tax savings due to interest payments for the next three years. The proposal is to have a market debt proportion of 50% (i.e., 0.50). The capital market requires per period rate of return on equity of 27% and on debt of 9%. The corporate tax rate is 40%, and interest is deductible for the calculation of income tax. Calculate the NPV and IRR based on

(a) Weighted average cost of capital method

(b) Arditty-Levy method

(c) Equity residual method

(d) Adjusted net present value method

Answer rating: 100% (QA)

a Given that Investment proposal requiring 16000 Returning constant cash flow 7000 Market ... View the full answer