Question: Stackhouse Industries has a new project available that requires an initial investment of $4.5 million. The project will provide unlevered cash flows of $675,000 per

Stackhouse Industries has a new project available that requires an initial investment of $4.5 million. The project will provide unlevered cash flows of $675,000 per year for the next 20 years. The company will finance the project with a debt-to-value ratio of 0.30. The companys bonds have YTM of 5.8 percent. (Assume beta of debt = 0.) The companies with operations comparable to this project have unlevered betas of 1.08, 1.10, and 1.24.

The risk free rate is 3.8 percent, and the market risk premium is 7 percent. The company has a tax rate of 34 percent. What is the NPV of this project? (Rounding might result in slightly different number, pick the closest)

A.

$670,985
B.

$1,492,427
C.

$876, 899
D.

$771,476

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