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Need help on A, B, and C You are a consultant who has been hired to evaluate a new product line for Markum Enterprises. The
Need help on A, B, and C
You are a consultant who has been hired to evaluate a new product line for Markum Enterprises. The upfront investment required to launch the product line is $14 milion. The product will generate free cash flow of $0.73 million the first year, and this free cash flow is expected to grow at a rate of 4% per year. Markum has an equity cost of capital of 11.3%, a debt cost of capital of 5.91%, and a tax rate of 42%. Markum maintains a debt-equity ratio of 0.40. a. What is the NPV of the new product line (including any tax shields from leverage)? b. How much debt will Markum initially take on as a result of launching this product line? c. How much of the product line's value is attributable to the present value of interest tax shields? a. What is the NPV of the new product line (including any tax shields from leverage)? The NPV of the new product line is $ million. (Round to two decimal places.) Step by Step Solution
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