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Suppose that Caterpillar ( CAT ) has a project with the following cash flows: YEAR 0 1 2 3 4 Cash flow - $ 4
Suppose that Caterpillar CAT has a project with the following cash flows:
YEAR
Cash flow $ $ $ $ $
The company has debt valued at billion on its balance sheet, while the market value of its common stock is roughly billion. The yield to maturity on the debt is and the cost of equity for the firm is Finally, the marginal tax rate facing the company is
What is the weighted average cost of capital for Caterpillar? What is the NPV for this project?
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