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A firm is considering a project that will generate perpetual after-tax cash flows of $20,500 per year beginning next year. The project has the same
A firm is considering a project that will generate perpetual after-tax cash flows of $20,500 per year beginning next year. The project has the same risk as the firms overall operations and must be financed externally. Equity flotation costs 16 percent and debt issues cost 3 percent on an after-tax basis. The firms D/E ratio is 0.5. |
What is the most the firm can pay for the project and still earn its required return? |
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