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A firm's investments cost $5,000 today and are expected to return $6,250 before taxes at the end of one year. The firm is financed with
A firm's investments cost $5,000 today and are expected to return $6,250 before taxes at the end of one year. The firm is financed with $3,000 in debt that promises a return of 18%. The expected return on the debt is 10%. The firm pays taxes at a marginal rate of 30%, and the appropriate cost of capital is 12%. What is the NPV of the firm if it uses 100% equity financing? Round your answer to the nearest dollar.
a. +$580
b. ($201)
c. $246
d. $326
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