A 5-year project requires equipment that costs $100,000. If undertaken, the shareholders will contribute $40,000 cash and borrow $60,000 at 7% with an interest-only loan with a maturity of 5 years and annual interest payments. The equipment will be depreciated straight-line to zero over the 5-year life of the project. There will be a pre-tax salvage value of $10,000. There are no other start-up costs at year 0. During years 1 through 5, the firm will sell 50,000 units of product at $5; variable costs are $3; there are no fixed costs. The cost of unlevered equity is 14%, the tax rate is 40% and the risk-free rate is 2%. 

What is the NPV of the project using the WACC and APV methodologies?  Calculate the cash flow from operations of the firm Select one: 

a. $71,000

b. $70,000

c. $68,000 

d. $69,000 

What is the NPV of the project using the WACC and APV methodologies?  Calculate the cost of capital of the firm Select one:

a. 11.64% 

b. 9.64%0 

c. 12.64% 

d. 10.64% 

What is the NPV of the project using the WACC and APV methodologies?  Using WACC methodology calculate the NPV Select one: 

a. $107,233 

b. $177,233 

c. $127,233 

d. $157,233 

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