The Bakery is considering a new project it considers to be a little riskier than its current operations. Thus, management has decided to add an additional 1.2 percent to the company's overall cost of capital when evaluating this project. 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 $28,000 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 5.7 percent. What is the projected net present value of the new project? Multiple Choice O O O о -$409 -$308 $427 $573
The Bakery is considering a new project it considers to be a little riskier than its current operations. Thus, management has decided to add an additional 1.2 percent to the company's overall cost of capital when evaluating this project. 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 $28,000 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 5.7 percent. What is the projected net present value of the new project? Multiple Choice O O O о -$409 -$308 $427 $573
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 8P: Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley...
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