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Can you show work as you go through it? I'm confused with getting npv formula. Macrosoft Corporation has an asset beta of 1.65, a tax
Can you show work as you go through it? I'm confused with getting npv formula.
Macrosoft Corporation has an asset beta of 1.65, a tax rate of 40%, and can typically borrow at 6%. The riskless rate is 1.5% and the expected return on the S&P 500 is 12.9%. Macrosoft is considering investing in a project with an initial cost of $400,000 and a yearly EBIT of $120,000 for the next 8 years. Macrosoft will borrow $350,000 for 8 years to finance the project, at a subsidized interest rate of 5%. a) What is Macrosoft's unlevered cost of equity? b) What is the NPV of this project if Macrosoft pays cash? c) What is the NPV of the loan to Macrosoft? d) What is the overall NPV of this project? Macrosoft Corporation has an asset beta of 1.65, a tax rate of 40%, and can typically borrow at 6%. The riskless rate is 1.5% and the expected return on the S&P 500 is 12.9%. Macrosoft is considering investing in a project with an initial cost of $400,000 and a yearly EBIT of $120,000 for the next 8 years. Macrosoft will borrow $350,000 for 8 years to finance the project, at a subsidized interest rate of 5%. a) What is Macrosoft's unlevered cost of equity? b) What is the NPV of this project if Macrosoft pays cash? c) What is the NPV of the loan to Macrosoft? d) What is the overall NPV of this projectStep by Step Solution
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