You are an American firm considering opening a factory in Ireland. You believe that your initial costs will be $5 million, and your expected after-tax cash flows will be $450,000/year for 25 years. You estimate an all-equity Beta of .8, that the risk-free rate is 5%, and that the market risk-premium is 7%. You are subject to a 21% tax rate. If you finance only with equity, which answer below is closest to your APV? Group of answer choices $-2,059,696 $ -1,096,719 $-182,309 $ 303,030 None of the Above.
You are an American firm considering opening a factory in Ireland. You believe that your initial costs will be $5 million, and your expected after-tax cash flows will be $450,000/year for 25 years. You estimate an all-equity Beta of .8, that the risk-free rate is 5%, and that the market risk-premium is 7%. You are subject to a 21% tax rate. If you finance only with equity, which answer below is closest to your APV? Group of answer choices $-2,059,696 $ -1,096,719 $-182,309 $ 303,030 None of the Above.
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:You are an American firm considering opening a factory in Ireland. You believe that your initial costs will be $5 million, and your expected after-tax cash flows will be $450,000/year for 25 years. You estimate an all-equity Beta of .8,
that the risk-free rate is 5%, and that the market risk - premium is 7%. You are subject to a 21% tax rate. If you finance only with equity, which answer below is closest to your APV? Group of answer choices $-2,059,696 $
-1,096,719 $-182,309 $ 303,030 None of the Above.
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