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A firm has a target debt-equity ratio of .37. The cost of debt is 9% and the cost of equity is 15%. The company has
A firm has a target debt-equity ratio of .37. The cost of debt is 9% and the cost of equity is 15%. The
company has a 34% tax rate. A project has an initial cost of $70,000 and an annual after-tax cash flow of
$21,000 for six years. There is no salvage value or networking capital requirement.
a) Determine the WACC for this firm.
b) Estimate the PV of the future after-tax cash flows.
c) Should it be pursued? Explain
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