Evaluate the project and its value

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Reference no: EM131968816

Latin Pollo has 10,000 bonds and 400,000 shares outstanding. The bonds have a 10% coupon, $1050 market value, and ten years remaining until maturity.

The YTM is 9.22%. The beta on the stock is 1.30 and its price is $40. The riskless return is 6%, the expected market return is 14%, and Latin Pollo's tax rate is 40%. The company also has 20,000 shares of preferred stock outstanding with a dividend of $5.00 and a market price of $40.

A project to introduce a new product costs $2,000,000 and is expected to have continuous cash flows of $270,000 per year. Evaluate this project.

Reference no: EM131968816

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