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This project's cash flows are Time 0 1 2 3 4 5 Cash Flow -$175,000 -$65,800 $94,000 $41,000 $122,000 $81,200 The required rate of return

This project's cash flows are

Time                 0                 1            2             3              4             5

Cash Flow -$175,000 -$65,800 $94,000 $41,000 $122,000 $81,200

The required rate of return for this project is 11% Maximum allowable payback and discount payback statistics for the firm are 3 and 3.5 years, respectively The firm has a capital structure of 73% equity, 5% preferred stock, and 22% debt The firm's before-tax cost of debt is 12%, its cost of equity is 15%, and its cost of preferred stock is 10% The firm's debt interest is fully tax deductible The firm's tax rate is the standard corporate tax rate

Calculate the following capital budgeting decision methods: 


IRR
  • NPV
  • Payback
  • Discounted Payback
  • IRR
  • PI
  • Firm-wide WACC

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SOLUTION Lets calculate the capital budgeting decision methods for the given project IRR Internal Rate of Return The Internal Rate of Return IRR is the discount rate at which the Net Present Value NPV ... blur-text-image

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