Question: Suppose that Caterpillar ( CAT ) has a project with the following cash flows: YEAR 0 1 2 3 4 Cash flow - $ 4

Suppose that Caterpillar (CAT) has a project with the following cash flows:
YEAR 01234
Cash flow -$40.00 $14.00 $10.00 $12.00 $12.00
The company has debt valued at 45.00 billion on its balance sheet, while the market value of its common stock is roughly 32.00 billion. The yield to maturity on the debt is 5.50%, and the cost of equity for the firm is 12.00%. Finally, the marginal tax rate facing the company is 32.00%.
What is the weighted average cost of capital for Caterpillar? What is the NPV for this 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!