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Norris Co. has developed an improved version of its most popular product. To get this improvement to the market will cost $48.02 million but the
Norris Co. has developed an improved version of its most popular product. To get this improvement to the market will cost $48.02 million but the project will return an annual cash flow of $13.5 million for 5 years in net cash flows. The firm's debt-equity ratio is 0.25, the cost of equity is 13 percent, the pre-tax cost of debt is 9 percent, and the tax rate is 21 percent. All interest is tax deductible. What is the NPV of the project? (Hint: First calculate WACC and then solve for NPV. Choose closest answer if necessary)
- $0.91M
- $0.92M
- $0.88M
- $0.85M
- $0.86M
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