Question
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
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