Watkins is considering a new project it hopes can boost the stock price (and make all stakeholders happy). The project has an initial cash outlay of $63,000 and projected cash inflows of $19,000 in Year 1, $34,000 in Year 2, and $29,000 in Year 3. The firm uses 33 percent debt and 67 percent common stock as its capital structure. The company's cost of equity is 13.8 percent while the aftertax cost of debt for the firm is 7.5 percent. What is the projected net present value of the new project? O $2,045 O $2,029 O $573 O $1,328 O -$107
Watkins is considering a new project it hopes can boost the stock price (and make all stakeholders happy). The project has an initial cash outlay of $63,000 and projected cash inflows of $19,000 in Year 1, $34,000 in Year 2, and $29,000 in Year 3. The firm uses 33 percent debt and 67 percent common stock as its capital structure. The company's cost of equity is 13.8 percent while the aftertax cost of debt for the firm is 7.5 percent. What is the projected net present value of the new project? O $2,045 O $2,029 O $573 O $1,328 O -$107
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
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Transcribed Image Text:Question 7
Watkins is considering a new project it hopes can boost the stock price (and make all stakeholders happy). The project has an initial cash outlay of $63,000 and projected cash inflows of
$19,000 in Year 1, $34,000 in Year 2, and $29,000 in Year 3. The firm uses 33 percent debt and 67 percent common stock as its capital structure. The company's cost of equity is 13.8 percent
while the aftertax cost of debt for the firm is 7.5 percent. What is the projected net present value of the new project?
O $2,045
O $2,029
O $573
O $1,328
O -$107
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