Npv for the expansion project

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Problem: Headmount Electronics is evaluating an expansion project that is expected to cost $20 million and generate an after-tax cash flow of $4 million for the next 10 years. The tax rate for the company is 35%.

Headmount Electronics has target debt-equity ratio 1:1. Its cost of equity is 16,9% whereas its pretax cost of debt is 14%. The floatation cost of equity is 12% whereas the floatation cost of debt is 14%.

Required:

What is the NPV for the expansion project?

Reference no: EM131031856

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