Question
Luckhit Marteen (LMT) is considering a $50 million investment (capex) to launch a new product line. The project is expected to generate a free cash
Luckhit Marteen (LMT) is considering a $50 million investment (capex) to launch a new product line. The project is expected to generate a free cash flow of $10 million per year and its unlevered cost of capital is 5%. To fund the investment LMT will take on $200 million in permanent debt. The corporate tax rate is 25%. Estimate the NPV of the project.
| a. | $200 million | |
| b. | $150 million | |
| c. | $250 million | |
| d. | $175 million |
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Cases In Financial Reporting
Authors: Ellen Engel, D. Eric Hirst, Mary Lea McAnally
8th Edition
1618531220, 9781618531223
