The FTE approach has been used by the firm to value their capital budgeting projects. The total investment cost at time 0 is $640,000. The company uses the FTE approach because they maintain a target debt to value ratio over project lives. The company has a debt to equity ratio of .5. The present value of the project including debt financing is $810,994. What is the relevant initial investment cost to use in determining the value of the project?
A) $640,000
B) $170,994
C) $267,628
D) $437,252
Correct Answer:
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