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ABC firm has a capital structure which is based on 60% common stock, 10% preferred stock and 30% debt. The cost of common stock is
ABC firm has a capital structure which is based on 60% common stock, 10% preferred stock and 30% debt. The cost of common stock is 15%, the cost of preferred stock is 11% and the pre-tax cost of debt is 9.5%. The firm's tax rate is 35%. The firm is considering a project that is equally as risky as the firm's current operations. This project has initial costs of $300,000 and annual cash inflows of $80,000, $270,000, and $112,000 over the next three years, respectively. What is the projected net present value of this project?
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