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Company A has two sources of financing for project A: Long term bond $2,000,000 paying 9% interest Common shares $6,000,000. T-Bill interest rate: 6%. Company
Company A has two sources of financing for project A:\ Long term bond $2,000,000 paying 9% interest\ Common shares $6,000,000. T-Bill interest rate: 6%. Company As Beta: 1.5. Expected return on market: 12%.\ The project will generate annu\ al operating income of 1,800,000 (income tax is 40%). The total asset current liability is 12,000,000. What is the annual Economic Value Added of the project. Should the company invest in the project?
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