Question
Fitzgerald Industries has a new project available that requires an initial investment of $5.1 million. The project will provide unlevered cash flows of $855,000 per
Fitzgerald Industries has a new project available that requires an initial investment of $5.1 million. The project will provide unlevered cash flows of $855,000 per year for the next 20 years. The company will finance the project with a debt-value ratio of .4. The companys bonds have a YTM of 7.6 percent. The companies with operations comparable to this project have unlevered betas of 1.04, .92, 1.19, and 1.14. The risk-free rate is 4.2 percent and the market risk premium is 6.7 percent. The tax rate is 25 percent. What is the NPV of this project?
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