Smithsonian Co. just acquired for a new project with a 5 year life a new plant for 16,000,000

Euros that it will depreciate straight line in 4 years. The company keeps a constant debt amount

(9,648,480 Euro). The project will have a 2,300,000 Euro expected EBIT for each year of the life

of the project, a cost of levered equity equal to 15%, a debt-to-equity ratio of 0.75 and a wacc

equal to 9.50%. The corporate tax rate is 34%. Assuming that the depreciation tax shield is as

risky as the companys debt, the NPV of the project is closest to

A. 3,502.340 Euro

B. 4, 987,009 Euro

C. 6,513,120 Euro

D. 7,761,986 Euro

The answer is C

This is my computation. Please help me with this question! Thank you!

use wacc method find Rd new project 5 year life initial asset depreciation 4 year EBIT Re (levered) D/E wacc tax rate debt costant debt equity asset (levered) 16 000 000 4000000 2 300 000 0,15 0,75 0,095 0,34 9 648 480 12864640 22 513 120 wacc = DN (1-tax r)*Rd+E/V*Re DN 0,42857143 EN 0,57142857 0,75 E 0,0143 Rd Re = Ru +D/E(Ru-Rd) Re= Ru(1+D/E)-D/E*Rd Ru 0,09184286 company constant debt amount 9648 480 1 5 pv sum 16 000 000 0 tax EBIT +depr time investment EBIT depr UCF DTS UCF-DTS ITS pv UCF-DTS pv DTS pv ITS 2 300 000 2 300 000 2 300 000 2 300 000 2 300 000 4 000 000 4000000 4000000 4000000 5518000 5518000 5518000 5518000 1518000 1360000 1360000 1360000 1 360000 4158000 4158000 4158000 4158000 1518000 91062 91062 91062 91062 91062 3808240,3 3487901,5 3194508,7 2925795,29 978297,82 14394744 1340826,2 1321922,7 1303285,7 1284911,47 05250946,1 89778,521 88512,789 87264,9 86034,6056 84821,656 436412,47 sum 20082102 -16000000 4082 102 @Ru @Rd @Rd