Question
A project is expected to generate the after-tax cash flows shown below. The company's weighted average cost of capital is 8.5% per year, its tax
A project is expected to generate the after-tax cash flows shown below. The company's weighted average cost of capital is 8.5% per year, its tax rate is 35%, its beta is 0.9, and its retention ratio is 40%. The risk-free rate is 3% per year and the market risk premium is 5% per year. Time Cash Flow 0 ($1,800) 1 $600 2 $600 3 $600 4 $600 What are the project's: 1. Net Present Value (NPV) 2. Internal rate of return (IRR) 3. Profitability index 4. Modified internal rate of return (MIRR) 5. Payback period 6. Should the company pursue the project? YES or NO
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