Travis & Sons has a capital structure that is based on 40 percent debt, 5 percent preferred stock, and 55 percent common stock. The pretax cost of debt is 7.5 percent, the cost of preferred is 9.6 percent, and the cost of common stock is 13 percent. The tax rate is 21 percent. The company is considering a project that is as risky as the overall firm. This project has initial costs of $325,000 and annual cash inflows of $87,000, $279,000, and $116,000 over the next three years, respectively. What is the projected net present value of this project? $71,821.94 $76,011.23 $68,211.04 $74272.98

Travis & Sons has a capital structure that is based on 40 percent debt, 5 percent preferred stock, and 55 percent common stock. The pretax cost of debt is 7.5 percent, the cost of preferred is 9.6 percent, and the cost of common stock is 13 percent. The tax rate is 21 percent. The company is considering a project that is as risky as the overall firm. This project has initial costs of $325,000 and annual cash inflows of $87,000, $279,000, and $116,000 over the next three years, respectively. What is the projected net present value of this project? $71,821.94 $76,011.23 $68,211.04 $74272.98

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 24P

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