A fiRm Has a Target Debt-Equity Ratio of

question 60

Multiple Choice

A firm has a target debt-equity ratio of .37. The cost of debt is 9% and the cost of equity is 15%. The company has a 34% tax rate. A project has an initial cost of $70,000 and an annual after-tax cash
flow of $21,000 for six years. There is no salvage value or net working capital requirement. What is
The net present value of the project using the WACC?

• A) $14,092
• B) $14,899
• C) $15,011
• D) $15,513
• E) $15,942

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Definitions:

Thimble Rotations

The turning movement of a thimble, often in reference to micrometers or other precision instruments, for fine adjustments or measurements.

Spindle Move

The action or ability of a spindle (a rotating axis of the machine, which often holds the workpiece) to move or be positioned within a machine.

Knife Blade

A thin, sharp-edged instrument typically used for cutting or as a tool, made of metal or other hard materials.

Punch

An impact tool used to drive out pins, rivets, or shafts, or to scribe/mark components for identification.