Question: Alpha Industries is considering a project with an initial cost of $9 million. The project will produce cash inflows of $2.09 million per year for

Alpha Industries is considering a project with an initial cost of $9 million. The project will produce cash inflows of $2.09 million per year for 6 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.91 percent and a cost of equity of 11.47 percent. The debt-equity ratio is .70 and the tax rate is 22 percent. What is the net present value of the 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!

Q:

Alpha Industries is considering a project with an initial cost of $9 million. The project will produce cash inflows of $2.09 million per year for 6 years. The project has the same risk as the firm....

Q:

Alpha Industries is considering a project with an initial cost of $9 million. The project will produce cash inflows of $2.09 million per year for 6 years. The project has the same risk as the firm....

Q:

Alpha Industries is considering a project with an initial cost of $9 million. The project will produce cash inflows of $2.09 million per year for 6 years. The project has the same risk as the firm....

Q:

Alpha Industries is considering a project with an initial cost of $9 million. The project will produce cash inflows of $2.09 million per year for 6 years. The project has the same risk as the firm....

Q:

Alpha Industries is considering a project with an initial cost of $9 million. The project will produce cash inflows of $2.09 million per year for 6 years. The project has the same risk as the firm....

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:

Assignment Six Lesson 6 1. Dennis wants to determine if the discount rate really makes any difference in the net present value of a project. He feels that if a project is acceptable at one rate of...

Q:

QUESTION 11 A project has the following cash flows. What is the approximate payback period? Year Cash Flow 0 -$7.000 1 $2,700 2 $3,300 3 $2,500 O a. 1.50 b. 1.75 Oc 2.1 d. 2.4 QUESTION 12 I Am Having...

Q:

QUESTION 12 I Am Having Fun, Inc. is considering a project with an initial cost of $45.000. The project will produce cash inflows of $12,000 a year for 5 years. What is the payback period? a 2.45...

Q:

please solve on paper ... 3 Project (Individual) Question 1: Answer the following questions: ..(8 Marks) 1. Explain the difference between a bid price and an asked price and also explain why the...

Q:

8. Accessed/ reviewed/ retrieved terms are used in_ Ans: OPrinted books Printed Journals OOnline materials O Dissertations

Q:

Using Illustrations 18-9, 18-10, 18-13, and 18-14, determine which of Model City's funds qualify as major funds using the percentage cutoffs. Calculate aggregate amounts for all other non-major...

Q:

Case Study: You are provided with the trial balance of KYC Trading as of 3 1 st December 2 0 2 1 : \ table [ [ , Debit,Credit ] , [ , RO 0 0 0 , RO 0 0 0 ] , [ Cash , 1 0 , 0 0 0 , ] , [ Trade...

Q:

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...