Company is evaluating a 10-year project requiring an initial investment of $50 million. The firm has...
Company is evaluating a 10-year project requiring an initial
investment of $50 million. The firm has made the following
projections:
EBIT = $10 million
Interest Expense = $2 million
Tax Rate = 40%
Depreciation = $5 million/year
Debt/Equity Ratio = 20%
Cost of Equity = 15%
Total Cost of Capital = 12%
The firm does not intend to change its debt to equity ratio when
making additional investments. Using FCFE, what is the expected net
present value (NPV) of this project for the equity investors?
Select one:
A. $9.18 million
B. $12.15 million
C. $16.83 million
D. $21.34 million
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