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 11.00%, the cost of preferred stock is 12.00%, the cost of common stock is 17.00%, and the WACC adjusted for taxes is 15.00%, what is the IRR of the project, given the expected cash flows listed here? Category 3 Investment - $3,000,000 NWC - $350,000 $350,000 $1,200,000 Operating Cash Flow $1,200,000 $1,200,000 Salvage $50,000 Total Incremental Cash Flow - $3,350,000 $1,200,000 $1,200,000 $1,600,000 A. About 13.11% B. About 11.16% C. About 12.02% D. About 8.94%

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 11.00%, the cost of preferred stock is 12.00%, the cost of common stock is 17.00%, and the WACC adjusted for taxes is 15.00%, what is the IRR of the project, given the expected cash flows listed here? Category 3 Investment - $3,000,000 NWC - $350,000 $350,000 $1,200,000 Operating Cash Flow $1,200,000 $1,200,000 Salvage $50,000 Total Incremental Cash Flow - $3,350,000 $1,200,000 $1,200,000 $1,600,000 A. About 13.11% B. About 11.16% C. About 12.02% D. About 8.94%

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.4IP

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