Question: Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.56 million per year for

Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.56 million per year for 8 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.49 percent and a cost of equity of 11.19 percent. The debtequity ratio is .56 and the tax rate is 21 percent. What is the net present value of the project?

A $400,549

B $462,857

C $188,348

D $321,651

E $381,475

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!

Q:

Alpha Industries is considering a project with an initial cost of $ 1 0 , 0 0 0 , 0 0 0 . The project will produce cash inflows of $ 1 , 6 0 0 , 0 0 0 per year for 9 years. The project has the same...

Q:

Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.56 million per year for 8 years. The project has the same risk as the firm....

Q:

Alpha Industries is considering a project with an initial cost of $ 8 . 4 million. The project will produce cash inflows of $ 1 . 5 6 million per year for 8 years. The project has the same risk as...

Q:

Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.56 million per year for 8 years. The project has the same risk as the firm....

Q:

Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.56 million per year for 8 years. The project has the same risk as the firm....

Q:

10 Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash infows of $156 million per year for years. The project has the same risk as the firm....

Q:

Alpha Industries is considering a project with an initial cost of $ 8 . 4 million. The project will produce cash inflows of $ 1 . 6 4 million per year for 8 years. The project has the same risk as...

Q:

Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.64 million per year for 8 years. The project has the same risk as the firm....

Q:

Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.64 million per year for 8 years. The project has the same risk as the firm....

Q:

Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.64 million per year for 8 years. The project has the same risk as the firm....

Q:

Penny Bailey bought on margin 500 shares of South Beloit Inc. at $35 per share. The initial margin requirement is 45% and the annual interest on margin loans is 12%. Over the next year the stock...

Q:

An investment will pay out $5500 at the end of each year for the next 8 years. What is the investment worth today? Assume a 8% interest rate.

Q:

Improved methods of oil and gas recovery, including fracking, have renewed interest in mineral royalties that many thought were worthless. An investor pays $ 1 0 0 0 0 0 to a landowner for the first...

Q:

SIMAD UNIVERSITY Class: BACC25 Subject: Islamic Accounting Instructions: a) Follow The Instructions. Midterm Exam Instructor: All Ibrahim Date: 6-4-2022 b) You Have 1.5 Hrs. To Complete This Test. c)...

Q:

6. On June 12 every year, some U.S. Americans celebrate Loving Day to commemorate: a. Your legal right to love someone of another race b. Your legal right to love someone of the same sex c. Your...

Q:

4. Which of the following is not the name of a Native American tribe? a. Seminole b. Apache c. Arapaho d. Illini

Q:

8. Sometimes viewed as a Scandinavian tortilla, these potato flatcakes are often sold in areas with high Scandinavian American populations: a. Lefse b. Lutefisk c. Aquavit d. Fiskepudding