Calculate the value of the project using the NPV-WACC method

a. Assume that the project has no impact on the company’s debt-equity ratio

b. Assume that the company rebalances its debt-equity ratio

Information

Sales	$500,000 per year in perpetuity
Cash costs	72% of sales
Initial Investment	$500,000
Tax Rate	34%
Project debt-equity proportion	25/75
Interest on debt	10% per year
Company’s geared equity beta	1.8
Market return	5%
Risk-free rate	3%

Answer rating: 100% (QA)

a Calculate the value of the project using the NPVWACC method assuming that the project has no impact on the companys debtequity ratio Step 1 Calculat... View the full answer