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Your company is considering an investment in a project which would require an initial outlay of $400,000 and produce expected cash flows in years 1-5
Your company is considering an investment in a project which would require an initial outlay of $400,000 and produce expected cash flows in years 1-5 of $96,765 per year. You have determined that the current after-tax cost of the firm's capital (required rate of return) for each source of financing is as follows: Cost of Debt 6% Cost of Preferred Stock 10% Cost of Common Stock 18% Long term debt currently makes up 20% of the capital structure, preferred stock 10%, and common stock 70%. What is the net present value of this project?
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