Calculate the npv of project using the wacc method

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CBC Inc. invests in a project that requires a machine of $39,000 and will generate annual taxable cash flow of $7,200 for 10 years. The machine has a CCA rate of 25% and salvage value of $900 at year 10. The asset class remains open with positive UCC. The unlevered cost of equity is 9%, the cost of debt is 5% and the tax rate is 30%.

A. Assume the project will be financed at its target debt-to-equity ratio of 0.4, calculate the NPV of this project using the WACC method.

B. Assume CBC borrows $8,000 to finance the project and repay the loan when the project ends, calculate the NPV of the project using the APV method.

C. With the same assumptions as part B, calculate the NPV of the project using the FTE method.

Reference no: EM133068225

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