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Please provide explanation!! Suppose a firm is considering an investment in a new project that generates after tax cash flow from assets of $300,000 per
Please provide explanation!!
Suppose a firm is considering an investment in a new project that generates after tax cash flow from assets of $300,000 per operating year for five years and has no salvage value. The cost of equity capital (re) is 24%, while debt costs (rd) are 12%. The firm has no current liabilities and a debt/asset ratio of .6. To the nearest dollar, what is the most the firm will pay in capital costs (C0) for the project if the tax rate is 34%?
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