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Calgary Industries, Inc., is considering a new project that costs $25 million. The project will generate after-tax (year-end) cash flows of $7 million for five
Calgary Industries, Inc., is considering a new project that costs $25 million. The project will generate after-tax (year-end) cash flows of $7 million for five years. The firms has a debt-to-equity ratio of 0.75. The cost of equity is 15% and the cost of debt is 9%. The corporate tax rate is 35%. It appears that the project has the same risk as that of the overall firm. Should Calgary take on the project?
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