Equity for new project-constant debt-to-value ratio

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Reference no: EM13929786

Grimm wants to raise $28 million in equity for a new project (not including the fee paid to the investment bank). Grimm keeps a constant debt-to-value ratio equal to 40%. The required interest rate on debt is 4%. The expected return on levered equity is 8% The perpetual EBIT of the project is $5 million a year and there is no asset depreciation. The corporate tax rate is 36%. The NPV of the project is $3 million.

Reference no: EM13929786

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