Annual after-tax cash flow-weighted-average cost of capital

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A. Unitron Corp. is considering project Z, which costs $50 million and offers an annual after-tax cash flow of $7.5 million in perpetuity. The project is in an industry that has greater market risk than Unitron’s typical projects. Unitron’s company weighted-average cost of capital, based on its typical projects, is 15%. Should Unitron Corp. accept project Z?

Yes, because the NPV of the project is positive.

No, because a zero-NPV project is a waste of resources.

Yes, because a zero-NPV project is marginally acceptable.

No, because the NPV of the project is negative.

Reference no: EM131074583

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