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Drake Company is planning to invest $2,500,000 in new equipment that will increase its after-tax cash flows by $800,000 for the next five year. Its
Drake Company is planning to invest $2,500,000 in new equipment that will increase its after-tax cash flows by $800,000 for the next five year. Its capital structure is 50% debt and 50% equity. If the cost of equity is 20% and after-tax cost of debt is 12%, should they undertake the project?
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