How much of the project value is generated from the tax

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A new project is expected to have a FCF of $6M one year from today.The yearly cashflows will increase by 3% per year, forever. You've found a comparable firm that takes on similar projects and has an expected return on equity of 10%, an expected return on debt of 6%, and a D/V ratio of 0.3. You've decided to keep a constant D/E ratio of 1.0 for the project. Your cost of debt is 4% and the corporate tax rate is 40%. What is the NPV of the project?

How much of the project's value is generated from the tax shield?

Reference no: EM132395185

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