The Webster Corp. is planning construction of a new shipping depot for its single manufacturing plant. The initial cost of the investment is $1 million. Efficiencies from the new depot are expected to reduce costs by $100,000 per year forever. The corporation has a total value of $60 million and has outstanding debt of $40 million. What is the NPV of the project if the firm has an after tax cost of debt of 6% and a cost equity of 9%? A. $428,571 B. $565,547 C. $1,000,000 D. None of these is the correct NPV
The Webster Corp. is planning construction of a new shipping depot for its single manufacturing plant. The initial cost of the investment is $1 million. Efficiencies from the new depot are expected to reduce costs by $100,000 per year forever. The corporation has a total value of $60 million and has outstanding debt of $40 million. What is the NPV of the project if the firm has an after tax cost of debt of 6% and a cost equity of 9%? A. $428,571 B. $565,547 C. $1,000,000 D. None of these is the correct 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
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The Webster Corp. is planning construction of a new shipping depot for its single
manufacturing plant. The initial cost of the investment is $1 million. Efficiencies from
the new depot are expected to reduce costs by $100,000 per year forever. The
corporation has a total value of $60 million and has outstanding debt of $40 million.
What is the NPV of the project if the firm has an after tax cost of debt of 6% and a
equity
A. $428,571
B. $565,547
C. $1,000,000
D. None of these is the correct NPV
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