The Tucker Corporation has the opportunity to invest $$1000$ now $($t $=0)$ and

expects an after$-$tax cash flow as follows:

C$0$ C$1$ C$2$

$-1000600700$

It uses straight line depreciation. The

appropriate cost of capital with all$-$equity

financing is r $=0\mathrm{.}12,$ the debt rate is rD

$=0\mathrm{.}08,$ and Tucker's target debt ratio for

such a project is D$/($D$+$E$)=0\mathrm{.}3.$

The tax rate is Tc $=0\mathrm{.}35.$Should the firm undertake the project?