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I need help with question 1, a, b, and c This project requires an initial investment of $2,000,000 in equipment which will cost an additional
I need help with question 1, a, b, and c
This project requires an initial investment of $2,000,000 in equipment which will cost an additional $100,000 to install. The firm will use the attached MACRS depreciation schedule to expense this equipment. Once the equipment is installed, the company will need to increase net working capital by $200,000. The project will last 6 years at which time the market value for the equipment will be $100,000. The project will project a product with a sales price of $22.00 per unit and the variable cost per unit will be $10.00. The fixed costs would be $250,000 per year. Because this project is very close to current products sold by the business, management want to use the current WACC as the valuation hurdle it must meet or surpass. Find the cost of the individual capital components: long-term debt (before tax and after tax) preferred stock average cost of retained earnings (avg. of Capital Asset Pricing Model & Dividend Discount Model)Step by Step Solution
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