Assume that several days ago, DLTR (the company you analyzed below) issued $75M worth of equity. At the same time, neither the company, nor the analysts expect DLTR to change its target D/V ratio. In addition, assume that right now, DLTR considers a new project (which will utilize primarily the core assets of DLTR). The projected project cash flows for DLTR:

Cost: $75 mil to be paid at T=0.

Project benefits: $6 mil/year for years 1,...,20

Should the company adopt or reject this project?

Hint: Your answer must be number-driven (i.e. not based on guesses, feelings). If you feel you need to know some required rate of return, then remember that DLTR is a company you analyzed below.

Calculated E

a. Shares Outstanding = $224.9M

b. Shares Trade = $98.85

c. Minority Interest = $0M

d. Deferred Income Tax = $1030.9M

= 224,900,000 * 98.85 + 0 + 1,030,900,000

= $23,262,265,000.00

Calculated D

a. Long-Term Debt = $3229.5M

= $3,229,500,000

Value of DLTR (V)

a. $23,262,265,000.00 + $3,229,500,000

= $26,491,765,000.00

Shareholders Own (E/V)

a. $23,262,265,000.00 / $26,491,765,000.00

= 87.81%

Debt-Holders Own (D/V)

a. $3,229,500,000 / $26,491,765,000.00

= 12.19%

Tax Rate (Given)

= 21%

WACC = E/V * Re + D/V * Rd * (1 - Tc)

= 87.81% * 5.61% + 12.19% * 2.19% * (1 - 21%)

= 5.14%

IN CHART FORM (FOR SIMPLER VIEW)

OLD DLTR
D/V	12.19%		Re	5.61%
E/V	87.81%		Rd	2.19%
Beta	0.8		WACC	5.14%
Rf	1.61%
Def. Spread (AAA)	0.58%
MRP	5%