Question: The answer is B. Why? 15. Tesla Inc. is considering investing in a project that will yield $1 billion in perpetuity and a grow at

The answer is B. Why? 15. Tesla Inc. is considering investing

The answer is B. Why?

15. Tesla Inc. is considering investing in a project that will yield $1 billion in perpetuity and a grow at a rate of 2% per year. Tesla's equity cost of capital is 7% and its debt cost of capital of is 5%. Tesla maintains a debt to equity ratio of 50% and the project requires an initial investment of $20 billion. The corporate tax rate is 40%. What is the NPV of this project? A) $11.26 billion B) $7.27 billion C) $3.08 billion D) $17.65 billion

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