Fitzgerald Industries has a new project available that requires an initial investment of $5.3 million. The project will provide unlevered cash flows of $853,000 per year for the next 20 years. The company will finance the project with a debt-value ratio of .3. The company's bonds have a YTM of 7.4 percent. The companies with operations comparable to this project have unlevered betas of 1.06, .94, 1.21, and 1.16. The risk-free rate is 4.4 percent and the market risk premium is 6.3 percent. The tax rate is 23 percent. What is the NPV of this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) NPV

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
icon
Related questions
Question
Fitzgerald Industries has a new project available that requires an initial investment of
$5.3 million. The project will provide unlevered cash flows of $853,000 per year for the
next 20 years. The company will finance the project with a debt-value ratio of .3. The
company's bonds have a YTM of 7.4 percent. The companies with operations
comparable to this project have unlevered betas of 1.06, .94, 1.21, and 1.16. The risk-free
rate is 4.4 percent and the market risk premium is 6.3 percent. The tax rate is 23
percent.
What is the NPV of this
your answer in dollars,
1,234,567.89)
NPV
project? (Do not round intermediate calculations and enter
not millions of dollars, rounded to 2 decimal places, e.g.,
Transcribed Image Text:Fitzgerald Industries has a new project available that requires an initial investment of $5.3 million. The project will provide unlevered cash flows of $853,000 per year for the next 20 years. The company will finance the project with a debt-value ratio of .3. The company's bonds have a YTM of 7.4 percent. The companies with operations comparable to this project have unlevered betas of 1.06, .94, 1.21, and 1.16. The risk-free rate is 4.4 percent and the market risk premium is 6.3 percent. The tax rate is 23 percent. What is the NPV of this your answer in dollars, 1,234,567.89) NPV project? (Do not round intermediate calculations and enter not millions of dollars, rounded to 2 decimal places, e.g.,
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
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…
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