The firm does not intend to change its debt to equity ratio

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Reference no: EM132063983

Company is evaluating a 10-year project requiring an initial investment of $50 million. The firm has made the following projections:

EBIT = $10 million

Interest Expense = $2 million

Tax Rate = 40%

Depreciation = $5 million/year

Debt/Equity Ratio = 20%

Cost of Equity = 15%

Total Cost of Capital = 12%

The firm does not intend to change its debt to equity ratio when making additional investments. Using FCFF, what is the expected net present value (NPV) of this project for the firm?

A. $9.18 million

B. $12.15 million

C. $16.83 million

D. $21.34 million

Reference no: EM132063983

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