You are planning a new project that is to be entirely financed by issuing new debt....

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X P 13-26 (similar to) Question Help You are planning a new project that is to be entirely financed by issuing new debt. The You are planning a new project that is to be entirely financed by issuing new debt. The project will require

$ 20.09$20.09

million in financing and you estimate its NPV to be

$ 14.757$14.757

million. The issue costs for the debt will be

2.7 %2.7%

of face value. Taking into account the costs of external financing, what is the NPV of the project?

The new NPV will be (Round to the nearest dollar.)

business finance

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Answer 1

Answer #1

Initial Investment = $20.09 million

NPV = $14.757 million

Cost of Debt = 2.7% of face value

So,

Cost of Debt = 0.027(20,090,000) = $542,430

So,

New NPV = 20,090,000 - 542,430

New NPV = $19,547,570

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Answer 2

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