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Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.64 million per year for 8 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.73 percent and a cost of equity of 11.35 percent. The debt-equity ratio is .64 and the tax rate is 21 percent. What is the net present value of the project? A. $831, 144B. $960,433C. $791,566D. $783,578E. $624,434

Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.64 million per year for 8 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.73 percent and a cost of equity of 11.35 percent. The debt-equity ratio is .64 and the tax rate is 21 percent. What is the net present value of the project? A. $831, 144B. $960,433C. $791,566D. $783,578E. $624,434

Essentials Of Investments
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
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Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.64 million per year for 8 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.73 percent and a cost of equity of 11.35 percent. The debt-equity ratio is .64 and the tax rate is 21 percent. What is the net present value of the project? A. $831, 144B. $960,433C. $791,566D. $783,578E. $624,434
Transcribed Image Text:Alpha Industries is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.64 million per year for 8 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.73 percent and a cost of equity of 11.35 percent. The debt-equity ratio is .64 and the tax rate is 21 percent. What is the net present value of the project? A. $831, 144B. $960,433C. $791,566D. $783,578E. $624,434
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