Webster Is Planning Construction of a New Shipping Depot for Its

question 26

Multiple Choice

Webster is planning construction of a new shipping depot for its single manufacturing plant.The initial cost of the investment is €1 million.Efficiencies from the new depot are expected to reduce
Costs by €100,000 forever.The corporation has a total value of €60 million and has outstanding
Debt of €40 million.What is the NPV of the project if the firm has an after tax cost of debt of 6% and
A cost equity of 9%?

• A)€428,571
• B)€444,459
• C)€565,547
• D)€1,000,000
• E)None of the above.

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Definitions:

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits.

Shareholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing ownership interest.

Expenses

Costs incurred in the process of generating revenue, typically including items like rent, salaries, and utilities.

Source Documents

Original records and documents containing the details that support or verify the transactions entered in an accounting system.