Ernst and Frank Companies has a capital structure which is based on 45 % debt, 10 % preferred stock, and 45 % common stock. The after-tax cost of debt is 5 %, the cost of preferred is 9 %, and the cost of common stock is 13 %. The company is considering a project that is equally as risky as the overall company. This project has initial costs of $630,000 and cash inflows of $450,000 a year for two years. What is the net present value of this project?

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The Answer of Ernst and Frank Companies has a capital structure which is based on 45 % debt, 10 % preferred stock, and 45 % common stock. The after-tax cost of debt is 5 %, the cost of preferred is 9 %, and the cost of common stock is 13 %. The company is considering a project that is equally as risky as the overall company. This project has initial costs of $630,000 and cash inflows of $450,000 a year for two years. What is the net present value of this project?

Ernst and Frank Companies Has a Capital Structure Which Is