(Solved by Humans)-ABC Firm has BELOW AVERAGE risk project under consideration. you
Question
ABC Firm has BELOW AVERAGE risk project under consideration. you choose to fund the project in the same manner as the firm's existing capital structure. if management adds 3 percentage points for above average risk projects and subtracts 2 percentage points for below average risk projects and the WACC adjusted for taxes is 8%, what is the NPV of the project, given the expected cash flow listed here? please be as detailed as possible and provide correct solution
| CATEGORY | T0 | T1 | T2 | T3 |
| INVESTMENT | -3,000,000 | |||
| NWC | -350,000 | 350,000 | ||
| OPERATING CASH FLOW | 950,000 | 950,000 | 950,000 | |
| SALVAGE | 50,000 | |||
| TOTAL INCREMENTAL CASH FLOW | -3350000 | 950000 | 950000 | 1350000 |
Discounting rate = 8% - 2% = 6%
NPV = present value of cash inflows ? initial outlay
T0
T1
T2
T3
NPV
Amount
-3,000,000
950,000
950,000
1,350,000
PVIF 6%, t-yrs
1
0.9434
1.8334
2.6730
Present...
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