Question
Your firm has an average-risk project under consideration. You choose to fund the project in the same manner as the firm's existing capital structure. If
Your firm has an average-risk project under consideration. You choose to fund the project in the same manner as the firm's existing capital structure. If the cost of debt is 8.00%, the cost of preferred stock is 11.00%, the cost of common stock is 14.00%, and the WACC adjusted for taxes is 13.00%, what is the NPV of the project, given the expected cash flows listed here?
| Category | T0 | T1 | T2 | T3 |
| Investment | -$2,000,000 |
|
|
|
| NWC | -$250,000 |
|
| $250,000 |
| Operating Cash Flow |
| $850,000 | $850,000 | $850,000 |
| Salvage |
|
|
| $50,000 |
| Total Incremental Cash Flow | -$2,250,000 | $850,000 | $850,000 | $1,150,000 |
A) -$74,121
B) $-35,105
C) $2,214,895
D) $2,479,604
Please show all work (not on excel) :)
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Canadian Multinationals And International Finance
Authors: Gregory P. Marchildon, Duncan McDowall
1st Edition
0714634816, 978-0714634814
