Illustrate what is the net present value of this project

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Reference no: EM13129519

Burns and Nuble is considering an investment in a project which would require an initial outlay of $320,000 and produce expected cash fl ows in years 1-5 of $87,385 per year. You have determined that the current after-tax cost of the fi rm’s capital (required rate of return) for each source of fi nancing is as

follows:

Cost of Long-Term Debt 8%
Cost of Preferred Stock 12%
Cost of Common Stock 16%

Long term debt currently makes up 20% of the capital structure, preferred stock 10%, and common stock 70%. What is the net present value of this project?

Reference no: EM13129519

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