Your company is considering a project that will cost $4 million. The project will generate after-tax cash flows of $900,000 per year for 8 years. The firms WACC is 15% and the firms target D/E ratio is 1.3. The flotation cost for equity is 5% and the flotation cost for debt is 3%. What is the NPV for the project after adjusting for flotation costs?

What is the proportion of debt in the firms capital structure?

Multiple Choice

• 46%

• 56%

• 62%

• 65%