Tony's Pizza is considering a new project that it considers to be a little riskier than its current operations. Thus, management has decided to add an additional 2 percent to their company's
Overall cost of capital when evaluating this project. The project has an initial cash outlay of $42,000
And projected cash inﬂows of $15,000 in year one, $25,000 in year two, and $12,000 in year three.
The ﬁrm uses 35 percent debt and 65 percent common stock as their capital structure. The
Company's cost of equity is 13 percent while the after-tax cost of debt for the ﬁrm is 6 percent. What
Is the projected net present value of the new project?

Question

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The Answer of Tony's Pizza is considering a new project that it considers to be a little riskier than its current operations. Thus, management has decided to add an additional 2 percent to their company's
Overall cost of capital when evaluating this project. The project has an initial cash outlay of $42,000
And projected cash inﬂows of $15,000 in year one, $25,000 in year two, and $12,000 in year three.
The ﬁrm uses 35 percent debt and 65 percent common stock as their capital structure. The
Company's cost of equity is 13 percent while the after-tax cost of debt for the ﬁrm is 6 percent. What
Is the projected net present value of the new project?

Tony's Pizza Is Considering a New Project That It Considers