Alpha Industries is considering a project with an initial cost of $8.1 million. The project will produce cash inflows of $1.46 million per year for 9 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.64 percent and a cost of equity of 11.29 percent. The debt-equity ratio is .61 and the tax rate is 39 percent. What is the net present value of the project?
Alpha Industries is considering a project with an initial cost of $8.1 million. The project will produce cash inflows of $1.46 million per year for 9 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.64 percent and a cost of equity of 11.29 percent. The debt-equity ratio is .61 and the tax rate is 39 percent. What is the net present value of the project?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Alpha Industries is considering a project with an initial cost of $8.1 million. The project will produce cash inflows of $1.46 million per year for 9 years.
The project has the same risk as the firm. The firm has a pretax cost of debt of 5.64 percent and a cost of equity of 11.29 percent. The debt-equity
ratio is .61 and the tax rate is 39 percent. What is the net present value of the project?
Multiple Choice
O
O
O
$811,659
$600,177
$937,917
$901,843](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F55742c6b-b8d0-4aa0-91ba-4316e3200de6%2Fc67c9b82-70c5-4d89-9fba-b4a212c5895c%2Ffuba4be_processed.png&w=3840&q=75)
Transcribed Image Text:Alpha Industries is considering a project with an initial cost of $8.1 million. The project will produce cash inflows of $1.46 million per year for 9 years.
The project has the same risk as the firm. The firm has a pretax cost of debt of 5.64 percent and a cost of equity of 11.29 percent. The debt-equity
ratio is .61 and the tax rate is 39 percent. What is the net present value of the project?
Multiple Choice
O
O
O
$811,659
$600,177
$937,917
$901,843
![If the economy booms, RTF, Inc., stock is expected to return 12 percent. If the economy goes into a recessionary period, then RTF is expected to
only return 5 percent. The probability of a boom is 79 percent while the probability of a recession is 21 percent. What is the variance of the returns
on RTF, Inc., stock?
Multiple Choice
O
O
.052650
.000642
.000813
.028512](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F55742c6b-b8d0-4aa0-91ba-4316e3200de6%2Fc67c9b82-70c5-4d89-9fba-b4a212c5895c%2Fptaqvpl_processed.png&w=3840&q=75)
Transcribed Image Text:If the economy booms, RTF, Inc., stock is expected to return 12 percent. If the economy goes into a recessionary period, then RTF is expected to
only return 5 percent. The probability of a boom is 79 percent while the probability of a recession is 21 percent. What is the variance of the returns
on RTF, Inc., stock?
Multiple Choice
O
O
.052650
.000642
.000813
.028512
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