What are the new irr and npv of the project

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Charlie Corp (CC) has a 3-year project that costs $900 today and produces EBITDA of $600 in year 1, $800 in year 2 and $700 in year 3. The asset will be fully depreciated using straight-line depreciation over the three year life. CC estimates that projects of this riskiness have a required rate of return of 20% and CC has a marginal tax rate of 30%. Assuming that CC is financed with 100% equity then what are the IRR and NPV of the project? Alternatively, CC can issue $500 of debt today with a 8% interest rate (interest paid each year and the principal paid in year 3. What are the new IRR and NPV of the project?

Reference no: EM132403012

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