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Suppose you have just become the president of Costco and the first decision you face is whether to go ahead with a plan to renovate

Suppose you have just become the president of Costco and the first decision you face is whether to go ahead with a plan to renovate the company's warehouse distribution system. The plan will cost the company $50 million, and it is expected to save $12 million per year after taxes over the next six years. Costcos capital structure is 90% in debt and 10% in equity. Costcos beta is 0.89. Costcos tax rate is 35%. Markets return is 11% and risk-free rate is 3.5%. Yield to maturity of Costcos bonds is 6.8%. Do you take on the renovation project?

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