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A company is considering its line. The project would last 3 years and has an annual investment of $200,000. The after tax cash flows are
A company is considering its line. The project would last 3 years and has an annual investment of $200,000. The after tax cash flows are estimated at $60,000 for year 1 and $120,000 for years 2 and 3. The firm has a target debt to equity ratio of 40%. Its cost of equity is 14% and its cost of debt is 7%. The tax rate is 34%. Should they expand the line?
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