Question 3. The Bakery is considering a new project it considers to be a little riskier than its current operations. Thus, management has decided to add an additional 2.0 percent to the company's overall cost of capital when evaluating this project. The project has an initial cash outlay of $50,000 and projected cash inflows of $20,000 in year 1, $30,000 in year 2, and $20,000 in year 3. The firm uses 50 percent debt and 50 percent common stock as its capital structure. The company's cost of equity is 10.0 percent while the aftertax cost of debt for the firm is 3.5 percent. What is the projected net present value of the new project? $8,674 $9,308 $8,998 $10,123 $9.639
Question 3. The Bakery is considering a new project it considers to be a little riskier than its current operations. Thus, management has decided to add an additional 2.0 percent to the company's overall cost of capital when evaluating this project. The project has an initial cash outlay of $50,000 and projected cash inflows of $20,000 in year 1, $30,000 in year 2, and $20,000 in year 3. The firm uses 50 percent debt and 50 percent common stock as its capital structure. The company's cost of equity is 10.0 percent while the aftertax cost of debt for the firm is 3.5 percent. What is the projected net present value of the new project? $8,674 $9,308 $8,998 $10,123 $9.639
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
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Transcribed Image Text:Question 3.
The Bakery is considering a new project it considers to be a little riskier than its
current operations. Thus, management has decided to add an additional 2.0 percent
to the company's overall cost of capital when evaluating this project. The project has
an initial cash outlay of $50,000 and projected cash inflows of $20,000 in year 1,
$30,000 in year 2, and $20,000 in year 3. The firm uses 50 percent debt and 50
percent common stock as its capital structure. The company's cost of equity is 10.0
percent while the aftertax cost of debt for the firm is 3.5 percent. What is the
projected net present value of the new project?
$8,674
$9,308
$8,998
$10,123
$9.639
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