The project has the same risk as the overall firm

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Reference no: EM131548116

Calgary Industries. Inc. is considering a new project that costs S25 million. The project will generate after-tax cash flows of $7 million for five years. The firm has a debt-equity ratio of .75. The cost of equity is 15 percent and the cost of debt is 9 percent. The corporate tax rate is 35 percent. It appears that the project has the same risk as the overall firm. Should Calgary take on the project? Why or why not?

Reference no: EM131548116

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