CrochetCo is considering an investment in a project which would require an initial outlay of $350,000 and produce expected cash flows in years 1-5 of $95,450 per year.You have determined that the current after-tax cost of the firm's capital (required rate of return)for each source of financing is as follows:

Long-term debt currently makes up 25% of the capital structure,preferred stock 15%,and common stock 60%.What is the net present value of this project?
A) -$9,306
B) $2,149
C) $5,983
D) $11,568

Question

CrochetCo is considering an investment in a project which would require an initial outlay of $350,000 and produce expected cash flows in years 1-5 of $95,450 per year.You have determined that the current after-tax cost of the firm's capital (required rate of return) for each source of financing is as follows:

Long-term debt currently makes up 25% of the capital structure,preferred stock 15%,and common stock 60%.What is the net present value of this project?

Long-term debt currently makes up 25% of the capital structure,preferred stock 15%,and common stock 60%.What is the net present value of this project?
A) -$9,306 
B) $2,149 
C) $5,983 
D) $11,568

Quizplus · Accepted Answer

The Answer of CrochetCo is considering an investment in a project which would require an initial outlay of $350,000 and produce expected cash flows in years 1-5 of $95,450 per year.You have determined that the current after-tax cost of the firm's capital (required rate of return)for each source of financing is as follows:

Long-term debt currently makes up 25% of the capital structure,preferred stock 15%,and common stock 60%.What is the net present value of this project?
A) -$9,306 
B) $2,149 
C) $5,983 
D) $11,568

CrochetCo Is Considering an Investment in a Project Which Would