Solution-Marginal corporate tax rate

Marginal corporate tax rate

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Reference no: EM131158532

Malachi's Mailboxes (MAMA) is considering a new product line that will require investment of $6,000,000 today. Currently, MAMA has $95 million (market value) of equity and $15 million of debt. If it makes the investment, it will maintain its current leverage ratio over time. In the absence of debt, the new product line would generate perpetual annual after-tax cash flows of $350000. For MAMA, the required return on debt is 7%, the required return on equity is 7.8%, and the marginal corporate tax rate is 32%. To the nearest $1000, the NPV of this investment is then:

Reference no: EM131158532

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Marginal corporate tax rate

Reference no: EM131158532

Reference no: EM131158532

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