Constant debt-to-equity ratio policy

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Sprint Co. keeps a constant debt-to-equity ratio policy equal to 1.4, its levered return on equity is 14.50% and its cost of debt is 3.75%. The company has just acquired new assets for a new project for 20,000,000 Euro. The new project will be managed separately from the rest of the company's operations and the project's assets have a risk profile comparable to the riskiness of the rest of the assets of the company. The project wiII be funded 70% with equity and 30% with debt. The debt will be kept constant through the 5 year life of the project. The assets wiII be depreciated straightline in 5 installments. The expected unlevered cash flow of the project will be 9,490,000 Euro every year. Assuming that the depreciation tax shield is as risky as the company's debt and that the corporate tax rate is 26%

what is the NPV of the project?

Reference no: EM131185121

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