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7 . Consider the project described in Problem 6 . Assume that the firm plans to finance 4 0 % of its net capital expenditure
Consider the project described in Problem Assume that the firm plans to finance of its net capital expenditure and working capital needs with debt.
a Estimate the free cash flow to equity for each of the four years.
b Estimate the payback period for equity investors in the firm.
c Estimate the NPV to equity investors if the cost of equity is Would you accept the project?
d Estimate the IRR to equity investors in the firm. Would you accept the project?
This is You are provided with the projected income statements for a project: Year Revenues $ $ $ $ $ Cost of goods sold $ $ $ $ $ Depreciation $ $ $ $ EBIT $ $ $ $ The tax rate is The project required an initial investment of $ and an additional investment of $ at the end of year two. The working capital is anticipated to be of revenues, and the working capital investment has to be made at the beginning of each period.
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