Should the firm undertake this investment opportunity

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Reference no: EM132045850

(Value of firm and WACC) Suppose a firm currently has an unleveraged required return of 13% and perpetual unleveraged after-tax income of $100,000 per year.

The firm has come up with an investment opportunity that would alter the firm's asset makeup so that it would increase its perpetual unleveraged after-tax income to $120,000 per year.

Because the new asset mix is riskier, the firm's unleveraged required return would also increase to 15%. Should the firm undertake this investment opportunity?

Possible answers:

new is better by $30,769.23 (this answer is incorrect- already tried to submit it)

new is better by $35,687.50

new is better by $41,056.25

new is better by $47,318.75

old is better by $47,318.75

old is better by $41,056.25

old is better by $35,687.50

old is better by $30,769.23

Reference no: EM132045850

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