Caterpillar (CAT) has debt valued at $40 billion on its balance sheet, while the market value of its common stock is roughly $20 billion. The yield to maturity on the debt is 5.50%, the cost of equity for the firm is 9%, and the tax rate for the firm is 35%. Caterpillar (CAT) has a project with the following cash flows (in millions): YEAR 0 Cash flow -$40 1 $12 2 $12 3 $12 Given this information, what is the NPV for the proposed project? $2.18 million $0.23 million $1.22 million $3.41 million -$1.29 million 4 $12

Caterpillar (CAT) has debt valued at $40 billion on its balance sheet, while the market value of its common stock is roughly $20 billion. The yield to maturity on the debt is 5.50%, the cost of equity for the firm is 9%, and the tax rate for the firm is 35%. Caterpillar (CAT) has a project with the following cash flows (in millions): YEAR 0 Cash flow -$40 1 $12 2 $12 3 $12 Given this information, what is the NPV for the proposed project? $2.18 million $0.23 million $1.22 million $3.41 million -$1.29 million 4 $12

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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