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Michael's is analyzing a project with an initial cost of $45,000 and cash inflows of $30,000 a year for two years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of .40. The pre-tax cost of debt is 8 percent and the cost of equity is 12 percent. The tax rate is 34 percent. What is the projected net present value of this project? a. 5892.17 b. 6277.30 C. 6451.86 d. 6913.15 e. 7010.27

Michael's is analyzing a project with an initial cost of $45,000 and cash inflows of $30,000 a year for two years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of .40. The pre-tax cost of debt is 8 percent and the cost of equity is 12 percent. The tax rate is 34 percent. What is the projected net present value of this project? a. 5892.17 b. 6277.30 C. 6451.86 d. 6913.15 e. 7010.27

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter23: Other Topics In Working Capital Management
Section: Chapter Questions
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hi, this is my finance question. i need answer asap.

Michael's is analyzing a project with an initial cost of $45,000 and cash inflows of $30,000 a year for two years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of .40. The pre-tax cost of debt is 8 percent and the cost of equity is 12 percent. The tax rate is 34 percent. What is the projected net present value of this project? а. 5892.17 b. 6277.30 С. 6451.86 d. 6913.15 e. 7010.27
Transcribed Image Text:Michael's is analyzing a project with an initial cost of $45,000 and cash inflows of $30,000 a year for two years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of .40. The pre-tax cost of debt is 8 percent and the cost of equity is 12 percent. The tax rate is 34 percent. What is the projected net present value of this project? а. 5892.17 b. 6277.30 С. 6451.86 d. 6913.15 e. 7010.27
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