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round to 3 decimals please You are a consultant who has been hired to evaluate a new product line for Markum Enterprises. The upfront investment
round to 3 decimals please
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 $9 million. The product will generate free cash flow of $0.74 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 11.7%, a debt cost of capital of 6.86%, and a tax rate of 27%. 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 Step by Step Solution
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