Fitzgerald Industries has a new project available that requires an initial investment of $5.1 million. The project will provide unlevered cash flows of $855,000 per year for the next 20 years. The company will finance the project with a debt-value ratio of .4. The company’s bonds have a YTM of 7.6 percent. The companies with operations comparable to this project have unlevered betas of 1.04, .92, 1.19, and 1.14. The risk-free rate is 4.2 percent and the market risk premium is 6.7 percent. The tax rate is 25 percent. What is the NPV of this
Fitzgerald Industries has a new project available that requires an initial investment of $5.1 million. The project will provide unlevered cash flows of $855,000 per year for the next 20 years. The company will finance the project with a debt-value ratio of .4. The company’s bonds have a YTM of 7.6 percent. The companies with operations comparable to this project have unlevered betas of 1.04, .92, 1.19, and 1.14. The risk-free rate is 4.2 percent and the market risk premium is 6.7 percent. The tax rate is 25 percent. What is the NPV of this
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
Related questions
Question
Fitzgerald Industries has a new project available that requires an initial investment of $5.1 million. The project will provide unlevered cash flows of $855,000 per year for the next 20 years. The company will finance the project with a debt-value ratio of .4. The company’s bonds have a YTM of 7.6 percent. The companies with operations comparable to this project have unlevered betas of 1.04, .92, 1.19, and 1.14. The risk-free rate is 4.2 percent and the market risk premium is 6.7 percent. The tax rate is 25 percent. What is the NPV of this project?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 6 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education