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Should the firm go ahead with the project

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Question - The market value of Roslin Ltd.'s debt is $250 million and the market value of the firm's equity is $220 million. The cost of equity is 19.60%, the pre-tax cost of debt is 9.40%, and the tax rate is 30%. The firm is evaluating a project that has the same risk as the firm's existing operations. The new project will cost $3 million initially, but will generate cash inflows of $800,000 per year for 10 years. Should the firm go ahead with the project?

Reference no: EM132834289

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