Question
A project has a cost of equity of 16% and a cost of debt of 5%. It expects to generate an EBIT of $10,000 in
A project has a cost of equity of 16% and a cost of debt of 5%. It expects to generate an EBIT of $10,000 in perpetuity. The initial investment is $20,000 and the optimal debt-to-value ratio is 1/2. The corporate tax rate is 20%. What is the net present value of the project?
(A) $40,000 (B) $60,000 (C) $80,000 (D) None of the above
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Investments
Authors: Zvi Bodie, Alex Kane, Alan Marcus, Lorne Switzer, Maureen Stapleton, Dana Boyko, Christine Panasian
9th Canadian Edition
1259271935, 9781259271939
