Alpha Industries is considering a project with an initial cost of $8.5 million. The project will produce cash inflows of $1.51 million per year for 9 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.76 percent and a cost of equity of 11.37 percent. The debt-equity ratio is .65 and the tax rate is 40 percent. What is the net present value of the project?

Alpha Industries is considering a project with an initial cost of $8.5 million. The project will produce cash inflows of $1.51 million per year for 9 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.76 percent and a cost of equity of 11.37 percent. The debt-equity ratio is .65 and the tax rate is 40 percent. What is the net present value of the project?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter14: Real Options

Section: Chapter Questions

Problem 3MC: Tropical Sweets is considering a project that will cost $70 million and will generate expected cash...

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