A firm is considering investing in a project that yields a cash flow of $4,000,000 per year before any interest or taxes are paid. The corporate tax rate is 40% and the project was financed with equity and with bonds that promise an interest payment of $1,000,000 per year. In using the Flow-to-Equity (FTE) method to value this project what annual cash flow figure would you use?

A) 1,900,000

B) 1,000,000

C) 1,800,000

D) 1,200,000

E) 2,000,000

Answer rating: 100% (QA)

Step 11 Answer Income Statement 1 Particulars 2 Cash flows before taxes and ... View the full answer