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teal Jungle, which currently operates a(n) dry cleaner, is considering project A, which would involve opening a(n) medical clinic. For most of its existence, Teal

teal Jungle, which currently operates a(n) dry cleaner, is considering project A, which would involve opening a(n) medical clinic. For most of its existence, Teal Jungle has operated a(n) dry cleaner, medical clinic, and skating rink. Project A would require an initial investment of 7,212 dollars and is expected to produce annual cash flows of 1,117 dollars each year forever with the first annual cash flow expected in 1 year. What is the NPV of project A, based on the information in this paragraph and the following table and applying the pure play approach to determining a projects cost of capital?

Firm

Line of business

WACC

Teal Jungle

dry cleaner

17.09 percent

Emerald Grove

medical clinic

14.76 percent

Red Royal

skating rink

21.46 percent

White Mountain

dry cleaner, medical clinic, and skating rink

19.13 percent

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