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Based on market values, Gubler's Gym has an equity multiplier of 1.47 times. Shareholders require a return of 10.95 percent on the company's stock and
Based on market values, Gubler's Gym has an equity multiplier of 1.47 times. Shareholders require a return of 10.95 percent on the company's stock and a pretax return of 4.85 percent on the company's debt. The company is evaluating a new project that has the same risk as the company itself. The project will generate annual aftertax cash flows of $279,000 per year for 8 years. The tax rate is 23 percent. What is the most the company would be willing to spend today on the project?
a. $1,564,918
b. $1,450,109
c. $1,500,113
d. $1,792,800
e. $1,544,234
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