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DIY invests in a 5-year project. The cost of the equipment is $107,988 and depreciates straight line to $0 salvage value. The annual EBIT is
DIY invests in a 5-year project. The cost of the equipment is $107,988 and depreciates straight line to $0 salvage value. The annual EBIT is $43,449. DIY finances the project with a 5-year loan of $39,153 that charges 6.1% interest. The cost of unlevered and levered equity are 7.5% and 11.1% respectively and the target debt/equity ratio is 0.25. The tax rate is 29%. Calculate the NPV of the project using the WACC method.
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