Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

What steps were taken to calculate PV of $50.19 ? I have the answer but what to understand the calculation in Excel or step by

What steps were taken to calculate PV of $50.19? I have the answer but what to understand the calculation in Excel or step by step.

A firm has a capital structure of 40% debt and 60% equity. Debt can be issued at a return of 10%, while the cost of equity for the firm is 15%. The firm is considering a $50 million expansion of their production facility. The project has the same risk as the firm overall and will earn $12 million per year for 6 years. What is the NPV of the expansion if the tax rate facing the firm is 40%?

WACC = .40*10%*(1-.4) + .60*15% = 11.40%

N = 6, I = 11.40%, PV = ?, PMT = $12, FV = $0

PV = $50.19

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Psychology Of Trading Tools And Techniques For Minding The Markets

Authors: Brett N. Steenbarger

1st Edition

0471267619, 9780471267614

More Books

Students also viewed these Finance questions