Alpha Industries is considering a project with an initial cost of $8.3 million. The project will produce inflows of $1.73 million per year for 7 years. The project has the same risk as the firm. The firm has cost of debt of 5.70 percent and a cost of equity of 11.33 percent. The debt-equity ratio is .63 and rate is 35 percent. What is the net present value of the project?
Alpha Industries is considering a project with an initial cost of $8.3 million. The project will produce inflows of $1.73 million per year for 7 years. The project has the same risk as the firm. The firm has cost of debt of 5.70 percent and a cost of equity of 11.33 percent. The debt-equity ratio is .63 and rate is 35 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...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning