• Use the following information to complete the project:
  • This project's cash flows are

Time	0	1	2	3	4	5
Cash Flow	-$221,500	-$94,100	$135,425	$68,000	$204,000	$99,225

• The required rate of return for this project is 16%
• Maximum allowable payback and discount payback statistics for the firm are 3 and 4 years, respectively
• The firm has a capital structure of 75% equity, 5% preferred stock, and 20% debt
• The firm's before-tax cost of equity is 17.5%, its cost of preferred stock is 12%, and its cost of debt is 15%
• The firm's debt interest is fully tax deductible
• The firm's tax rate is the standard corporate tax rate
• Based on the above information, calculate the following capital budgeting decision methods
  • NPV
  • Payback
  • Discounted Payback
  • IRR
  • PI
  • Firm-wide WACC
• Evaluate this project for each capital budgeting decision method to determine if the project should be accepted or rejected (note: determine the feasibility of the project for EACH method)
• Make a final project acceptance or rejection proposal using key finance concepts from the course to support your proposal*

Answer rating: 100% (QA)

To evaluate the project we first need to calculate the cash flows discounted to their present value using the firms weighted average cost of capital W... View the full answer