A Proposed Project Lasts Three Years and Has an Initial

question 216

Multiple Choice

A proposed project lasts three years and has an initial investment of $200,000. The after-tax cash flows are estimated at $60,000 for year 1, $120,000 for year 2, and $135,000 for year 3. The firm has a target debt/equity ratio of 1.2. The firm's cost of equity is 14% and its cost of debt is 9%. The tax rate is 34%. What is the NPV of this project?

• A) -$12,370
• B) $13,687
• C) $37,723
• D) $46,120
• E) $57,185

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