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The common stock of Buildwell Conservation & Construction, Inc. (BCC) has a beta of .80. The par value is $.10. Additional paid in stockholders capital

  1. The common stock of Buildwell Conservation & Construction, Inc. (BCC) has a beta of .80. The par value is $.10. Additional paid in stockholders capital is $9,900,000. Retained earnings equals $10,000,000. The Treasury bill rate is 4 percent and the market risk premium is estimated at 8 percent. BCCs target capital structure is 30 percent debt and 70 percent equity. BCCs bonds have 10 years remaining until maturity, a coupon rate of 12%, and a YTM of 10%. Cash and short-term securities are $1,000,000. Accounts receivable are $3,000,000. Inventories total $7,000,000. Plant & Equipment total $21,000,000. BCC is evaluating a project that costs $750,000 and is expected to continuously generate after-tax cash flows of $100,000 per year. The firms marginal tax rate is 35 percent. What do you recommend? Why? NPV?

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