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Consider a project that will cost $1 Million. The project will generate after-tax cash flows of $400,000 per year for 7 years. Firm will fund
Consider a project that will cost $1 Million. The project will generate after-tax cash flows of $400,000 per year for 7 years. Firm will fund the project with 40% equity and 60% debt. Firms cost of equity is 20%, cost of debt is 10%, marginal tax rate is 30%. The floatation cost for equity is 7% and the floatation cost for debt is 5%.
The NPV of the project after adjusting for floatation costs is closest to:
Multiple Choice
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$752,412.4
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$802,579.6
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$61,571.1
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$741,008.5
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