Vargo's has a target debt-to-value ratio of .6.The pretax cost of debt is 8.4 percent,the tax rate is 21 percent,and the unlevered cost of equity 13.2 percent.A project the firm is considering has a cash flow to the levered equityholders of $48,700 and an initial unborrowed cost of $216,000.What is the NPV of the project?

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The correct answer is A because the NPV of the project is $41,836. The debt-to-value ratio is .6, the pretax cost of debt is 8.4 percent, the tax rate is 21 percent, and the unlevered cost of equity is 13.2 percent. The cash flow to the levered equityholders is $48,700 and the initial unborrowed cost is $216,000.

Vargo's Has a Target Debt-To-Value Ratio of