Question: A company is analyzing a project with an initial cost of $150,000 and cash inflows of $70,000 in Year 1, $80,000 in Year 2, and

A company is analyzing a project with an initial cost of $150,000 and cash inflows of $70,000 in Year 1, $80,000 in Year 2, and $90,000 in Year 3. This project has the same risk level as the current company. The company uses only debt and common stock to finance its operations. The market value of equity of the company is $1 million, and the market value of debt is $0.5 million. The cost of debt is 5 percent per year, the cost of equity is 10 percent per year, and the tax rate is 21 percent. What is the projected net present value of this project?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

LL Incorporated's currently outstanding 7% coupon bonds have a yield to maturity of 12%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal...

Managerial Finance NPVs, IRRs, and MIRRs for Independent Projects Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital...

Problem 9-2 After-Tax Cost of Debt LL Incorporated's currently outstanding 10% coupon bonds have a yield to maturity of 13%. LL believes it could issue new bonds at par that would provide a similar...

1. LL Incorporated's currently outstanding 10% coupon bonds have a yield to maturity of 13%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its...

Alleyne thinks that projects should be selected based on their NPVs. Assume all cash flows occur at the end of the year except for initial investment amounts. Calculate the NPV for each project....

please assist with the following 9 questions: 1.Broussard Skateboard's sales are expected to increase by 25% from $8.0 million in 2016 to $10.00 million in 2017. Its assets totaled $6 million at the...

I have some finance problems need help,please download and look at them. 1. You purchased 200 shares of stock at a price of $36.72 per share. Over the last year, you have received total dividend...

NPV A project has an initial cost of $59,900, expected net cash inflows of $11,000 per year for 8 years, and a cost of capital of 8%. What is the project's NPV? Construct a time line. NPVs, IRRs, and...

Hi, This is a short HW assignement that needs to be done in excel. If you are good at finance this should take 30 minutes. Please do your assignments in Excel. Show ALL your calculations in Excel....

Please answer the following questions. A project has an initial cost of $55,000, expected net cash inflows of $12,000 per year for 9 years, and a cost of capital of 12%. What is the project's PI? (...

Two particles with charges Q and -Q are fixed at the vertices of an equilateral triangle with sides of length a. If k= 1/4reo, the work required to move a particle with charge from other vertex to...

E be a set in a metric space and E' be the set of all limit points of E. Is it possible that both E and E' have the same set of limit points? Justify your answer.

Question 2 5 5 pts Refering to the owner financing question, what is the implied price of the house if the buyer is moking a $ 5 0 , 0 0 0 down payment on the house? Round to the nearest $ 1 , 0 0 0...

Draw a class diagram and its relationship based on the following statements. You can use any UML tool/software to represent your class diagram. Do NOT copy and paste your diagram, use the attachment...