Question
A project costs $1 million and has a base-case NPV of exactly zero (NPV = 0). (A negative answer should be indicated by a minus
A project costs $1 million and has a base-case NPV of exactly zero (NPV = 0). (A negative answer should be indicated by a minus sign. Enter your answers in dollars, not millions of dollars.) a. If the firm invests, it has to raise $560,000 by a stock issue. Issue costs are 14.75% of net proceeds. What is the projects APV?
b. If the firm invests, there are no issue costs, but its debt capacity increases by $560,000. The present value of interest tax shields on this debt is $82,000. What is the projects APV?
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Cost Management Accounting And Control
Authors: Don R. Hansen, Maryanne M. Mowen
3rd Edition
0324002327, 978-0324002324
