Please show all your work! Polarlech Inc. is considering producing a new widget. The production equipment, costing $12 million, will depreciate over a six-year period with no salvage value. The widget's retail price is $250, with an anticipated annual sales volume of 150,000 units. Fixed costs are projected at $900,000 annually, and variable costs amount to $150 per widget. Initial project startup requires a net working capital investment of $1,200,000. No additional working capital is needed during the project. The applicable tax rate is 25%. Calculate the IRRs and NPVs for this project using the WACC under the following scenario: PolarTech Inc. can obtain debt funding at 8 percent. Its marginal income tax rate is 25 percent. The yield on US Treasury securities is 3 percent. The market risk premium is 6.0 percent, and the firm's beta is 2. It has a targeted debt-to-equity ratio of 1:1 (50 percent debt, 50 percent equity).
Please show all your work!
Polarlech Inc. is considering producing a new widget. The production equipment, costing $12 million, will
Calculate the IRRs and NPVs for this project using the WACC under the following scenario:
PolarTech Inc. can obtain debt funding at 8 percent. Its marginal income tax rate is 25 percent. The yield on US Treasury securities is 3 percent. The market risk premium is 6.0 percent, and the firm's beta is 2. It has a targeted debt-to-equity ratio of 1:1 (50 percent debt, 50 percent equity).
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