Your Firm Has an Average-Risk Project Under Consideration A)-$917,930
B)-$829,685
C)$0
D)$2,520,315

question 68

Multiple Choice

Your firm has an average-risk project under consideration.You choose to fund the project in the same manner as the firm's existing capital structure.If the cost of debt is 10.00%,the cost of preferred stock is 13.00%,the cost of common stock is 16.00%,and the WACC adjusted for taxes is 13.00%,what is the NPV of the project,given the expected cash flows listed here? $$\begin{array} { | l | c | c | c | c | } \hline \text { Category } & \mathrm { T } _ { 0 } & \mathrm {~T} _ { 1 } & \mathrm {~T} _ { 2 } & \mathrm {~T} _ { 3 } \\\hline \text { Investment } & - \$ 3,000,000 & & & \\\hline \text { NWC } & - \$ 350,000 & & & \$ 350,000 \\\hline \text { Operating Cash Flow } & & \$ 950,000 & \$ 950,000 & \$ 950,000 \\\hline \text { Salvage } & & & & \$ 50,000 \\\hline \text { Total Incremental Cash Flow } & - \$ 3,350,000 & \$ 950,000 & \$ 950,000 & \$ 1,350,000 \\\hline\end{array}$$

• A)-$917,930
• B)-$829,685
• C)$0
• D)$2,520,315

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