Your
company is considering an investment in a project which would require
an initial outlay of $300,000 and produce expected cash flows in Years 1
through 5 of $87,385 per year. You have determined that the current
after-tax cost of the firm’s capital (required rate of return) for each
source of financing is as follows:
Cost of debt8%
Cost of preferred stock12%
Cost of common stock16%
Long-term debt currently makes up 20% of the capital structure, preferred stock 10%, and common stock 70%. What is the net present value of this project?
A. $1,568 B. $463 C. $1,241 D. $871
Cost of debt8%
Cost of preferred stock12%
Cost of common stock16%
Long-term debt currently makes up 20% of the capital structure, preferred stock 10%, and common stock 70%. What is the net present value of this project?
A. $1,568 B. $463 C. $1,241 D. $871
No comments:
Post a Comment
Note: only a member of this blog may post a comment.