Question: WACC Comprehensive A company has a proposed 2-year project with the cash flows shown below and would like to calculate the NPV of this project
WACC Comprehensive
A company has a proposed 2-year project with the cash flows shown below and would like to calculate the NPV of this project so that they can decide whether to pursue the project or not. The company has a target capital structure of 60% equity and 40% debt. The beta for this firms stock is 1, the risk-free rate is 4.9, and the expected market risk premium is 6%. The bonds for this company pay interest semiannually and have a coupon interest rate of 8%, 20 years to maturity, a face value of $1,000, and a current price of 1,148.43. If the corporate tax rate is 39%, what is the NPV of the proposed project for this firm?
| Years | Cash Flows |
| 0 | -4,000 |
| 1 | 1,000 |
| 2 | 2,000 |
The correct answer is -1,366. Show step by step how I arrive at this answer.
Please do not post an answer that is not -1,366 because it is not right! My teacher gave the answer of -1,366 so this is how I know it is the right answer.
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