Douglass Enterprises has a capital structure which is based on 40 percent debt, 10 percent preferred stock, and 50 percent common stock. The after-tax cost of debt is 6 percent, the cost of
Preferred is 7 percent, and the cost of common stock is 9 percent. The company is considering a
Project that is equally as risky as the overall ﬁrm. This project has initial costs of $125,000 and cash
Inﬂows of $76,000 a year for two years. What is the projected net present value of this project?

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The Answer of Douglass Enterprises has a capital structure which is based on 40 percent debt, 10 percent preferred stock, and 50 percent common stock. The after-tax cost of debt is 6 percent, the cost of
Preferred is 7 percent, and the cost of common stock is 9 percent. The company is considering a
Project that is equally as risky as the overall ﬁrm. This project has initial costs of $125,000 and cash
Inﬂows of $76,000 a year for two years. What is the projected net present value of this project?

Douglass Enterprises Has a Capital Structure Which Is Based on 40