A project with an initial cost of $7.1 million is being considered by S company. For the next 6 years, the project will produce cash inflows of $1.40 million per year. The project will produce cash inflows of $1 million a year for six years. To assign discount rates to projects, a subjective approach is being used. The subjective adjustment is +1.2 percent for this project. The company has a pretax cost of debt of 8.2 percent and a cost of equity of 16.3 percent. The debt-equity ratio is .48 and the tax rate is 32 percent. Calculate the net present value of the project? (Round the answer to the nearest hundred dollars). $1,464,519 $1,464,200 $1,464.450 $5.635,481
A project with an initial cost of $7.1 million is being considered by S company. For the next 6 years, the project will produce cash inflows of $1.40 million per year. The project will produce cash inflows of $1 million a year for six years. To assign discount rates to projects, a subjective approach is being used. The subjective adjustment is +1.2 percent for this project. The company has a pretax cost of debt of 8.2 percent and a cost of equity of 16.3 percent. The debt-equity ratio is .48 and the tax rate is 32 percent. Calculate the net present value of the project? (Round the answer to the nearest hundred dollars). $1,464,519 $1,464,200 $1,464.450 $5.635,481
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A project with an initial cost of $7.1 million is being considered by S company. For the next 6 years, the project will produce cash inflows of $1.40 million per year. The project will produce
cash inflows of $1 million a year for six years. To assign discount rates to projects, a subjective approach is being used. The subjective adjustment is +1.2 percent for this project. The
company has a pretax cost of debt of 8.2 percent and a cost of equity of 16.3 percent. The debt-equity ratio is .48 and the tax rate is 32 percent. Calculate the net present value of the
project? (Round the answer to the nearest hundred dollars).
$1,464,519
$1,464,200
$1,464.450
$5.635,481
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