Calculate the npv of the project

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Reference no: EM133001870

KOL Inc. is considering a 5-year project which requires a $413,000 machine. The CCA rate is 20% and it will be sold for $76,000 when the project ends. The machine is the only asset in the asset class. The project is expected to generate before tax cash flows of $325,000 per year for 5 years. The firm's target debt-to-equity ratio is 0.7. If the project is financed by all equity, the cost of capital would be 11%. The corporate tax rate is 33%. To finance the machine, KOL plans to borrow $279,000 at 6% and to repay one half of the loan at the end of year 3 and the remaining balance at year 5.

Using the adjusted present value method, calculate the NPV of the project.

Using the weighted average cost of capital method, calculate the NPV of the project.

Reference no: EM133001870

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