Travis & Sons Has a Capital Structure Which Is Based

question 3

Multiple Choice

Travis & Sons has a capital structure which is based on 40 percent debt,5 percent preferred stock,and 55 percent common stock.The pre-tax cost of debt is 7.5 percent,the cost of preferred is 9 percent,and the cost of common stock is 13 percent.The company's tax rate is 39 percent.The company is considering a project that is equally as risky as the overall firm.This project has initial costs of $325,000 and annual cash inflows of $87,000,$279,000,and $116,000 over the next three years,respectively.What is the projected net present value of this project?

• A)$68,211.04
• B)$68,879.97
• C)$69,361.08
• D)$74,208.18
• E)$76,011.23

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