(Solved by Humans)-A project under consideration is expected to produce annual cash

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Type of Paper:

Academic Level: Undergrad. (yrs 3-4)

Paper Format: APA

Pages: 5 Words: 1375

Question

A project under consideration is expected to produce annual cash flows of $6.2 million for the next 30 years. Assuming a tax rate of 40%, $1.4 million in annual interest payments, and a (levered) cost of equity of 17%, determine the net present value thing the FIT method based on a cost of $15 million. What does the NPV become if the tax rate falls to 35%? ?


Net present value at 40% tax rate:
Annual cash inflows=$6.2 million
Annual interest=$1.4 million
Initial cost=$15 million
Levered cost of equity=17%
Period= 30 years
Net annual cash flow= 6.2-1.4
=...

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