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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.

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 weighted average flotation cost? (use Round function to 4 decimal places if using Excel)?

Multiple Choice

  • 2.79%

  • 4.56%

  • 5.85%

  • 3.87%

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