What are unlevered cash flows in years

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Reference no: EM131559357

Sawtooth Machinery is considering a 4-year project to manufacture a new line of chainsaws. The project requires an investment of $760,000 and will generate $380,000 per year earnings before interest, taxes, and depreciation. The investment will be depreciated straight line to zero over four years. The tax rate is 35% and the cost of levered equity is 13%. Sawtooth will borrow 40% of the project value at 6%. Debt will be paid down in one lump sum payment in the 4^th years.

a) What are the unlevered cash flows in years 0 through year 4?

b) What is the NPV of the project if it were all equity financed?

Reference no: EM131559357

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