Question
Dyrdek Enterprises has equity with a market value of $12.2 million and the market value of debt is $4.25 million. The company is evaluating a
Dyrdek Enterprises has equity with a market value of $12.2 million and the market value of debt is $4.25 million. The company is evaluating a new project that has more risk than the firm. As a result, the company will apply a risk adjustment factor of 1.6 percent. The new project will cost $2.48 million today and provide annual cash flows of $646,000 for the next 6 years. The company's cost of equity is 11.63 percent and the pretax cost of debt is 5.02 percent. The tax rate is 25 percent. What is the project's NPV?
a. $212,299
b. $506,561
c. $204,036
d. $366,955
e. $237,409
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