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Category > Business & Finance Posted 10 May 2017 My Price 3.00

Carter & Carter (C&C) is considering a project that requires

Carter & Carter (C&C) is considering a project that requires an initial cash outlay for equipment of $6.3 million. The equipment will be depreciated to a zero book value over the 4-year life of the project. At the end of the project, C&C expects to sell the equipment for $1 million. The project will produce cash inflows of $1.5 million a year for the first 2 years and $2.2 million a year for the following 2 years. C&C has a cost of equity of 12 percent and a pre-tax cost of debt of 8 percent. The debt-equity ratio is .75 and the tax rate is 35 percent.

1. What is the companyAc€?cs WACC?

2. At the companyAc€?cs WACC (as computed in part a), what is the NPV of the project?

 

3. If the company has decided that they will accept the project if the projectAc€?cs internal rate of return (IRR) exceeds the firmAc€?cs weighted average cost of capital (WACC) by 2 percent or more, should the project be considered (i.e. accepted)?

Answers

Alpha Geek
(8)
Status NEW Posted 10 May 2017 02:05 PM My Price 3.00

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file 1494427927-Answer.docx preview (216 words )
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