Watkins is considering a new project it hopes can boost the stock price (and make all stakeholders happy). The project has an initial cash outlay of $63,000 and projected cash inflows of $19,000 in Year 1, $34,000 in Year 2, and $29,000 in Year 3. The firm uses 33 percent debt and 67 percent common stock as its capital structure. The company's cost of equity is 13.8 percent while the aftertax cost of debt for the firm is 7.5 percent. What is the projected net present value of the new project? O $2,045 O $2,029 O $573 O $1,328 O -$107

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter16: Capital Structure Decisions
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Problem 10P: Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a...
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Question 7
Watkins is considering a new project it hopes can boost the stock price (and make all stakeholders happy). The project has an initial cash outlay of $63,000 and projected cash inflows of
$19,000 in Year 1, $34,000 in Year 2, and $29,000 in Year 3. The firm uses 33 percent debt and 67 percent common stock as its capital structure. The company's cost of equity is 13.8 percent
while the aftertax cost of debt for the firm is 7.5 percent. What is the projected net present value of the new project?
O $2,045
O $2,029
O $573
O $1,328
O -$107
Transcribed Image Text:Question 7 Watkins is considering a new project it hopes can boost the stock price (and make all stakeholders happy). The project has an initial cash outlay of $63,000 and projected cash inflows of $19,000 in Year 1, $34,000 in Year 2, and $29,000 in Year 3. The firm uses 33 percent debt and 67 percent common stock as its capital structure. The company's cost of equity is 13.8 percent while the aftertax cost of debt for the firm is 7.5 percent. What is the projected net present value of the new project? O $2,045 O $2,029 O $573 O $1,328 O -$107
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