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Acme Corp has a target capital structure of 40% debt and 60% equity. It has $350 million in bonds outstanding with a yield of 7%

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Acme Corp has a target capital structure of 40% debt and 60% equity. It has $350 million in bonds outstanding with a yield of 7% and 50 million shares of stock outstanding with a current market price of $10.50 per share. The company's beta is 1.32 and the risk-free rate of interest is 4% with a market risk premium of 6%. The firm has a tax rate of 25%. The company is looking to raise $250 million to build a second factory. The new factory will increase output substantially. The table below shows the anticipated cash flows generated from the new factory including a salvage value in year 5. What is the NPV of this project? Year Cash Flow (Smill) -250 1 50 2 50 3 100 4 100 5 5 50 O $48.78 million O $16.66 million O $25,87 million O $19.54 million

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