New project available that requires initial investment

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Dorman Industries has a new project available that requires an initial investment of $4.7 million. The project will provide unlevered cash flows of $695,000 per year for the next 20 years. The company will finance the project with a debt-to-value ratio of .3. The company’s bonds have a YTM of 7 percent. The companies with operations comparable to this project have unlevered betas of 1.17, 1.10, 1.32, and 1.27. The risk-free rate is 4 percent, and the market risk premium is 7.2 percent. The company has a tax rate of 40 percent. What is the NPV of this project?

Reference no: EM131942875

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