A firm has a target debt-equity ratio of 0.8. The cost of debt is 8.0% and the cost of equity is 14%. The company has a 32% tax rate. A project has an initial cost of $60,000 and an annual after-tax cash flow of $22,000 for 7 years. There is no salvage value or net working capital requirement. What is the net present value of the project using the WACC? NOTE: Keep at least 4 decimal places for INTERMEDIATE CALCULATIONS. Enter your FINAL ANSWER to TWO decimal places. Do NOT include a $ sign.
A firm has a target debt-equity ratio of 0.8. The cost of debt is 8.0% and the cost of equity is 14%. The company has a 32% tax rate. A project has an initial cost of $60,000 and an annual after-tax cash flow of $22,000 for 7 years. There is no salvage value or net working capital requirement. What is the net present value of the project using the WACC? NOTE: Keep at least 4 decimal places for INTERMEDIATE CALCULATIONS. Enter your FINAL ANSWER to TWO decimal places. Do NOT include a $ sign.
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 11P
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