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What is the most the company would be willing to spend today

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Question - Based on market values, Gubler's Gym has an equity multiplier of 1.59 times. Shareholders require a return of 11.43 percent on the company's stock and a pre-tax return of 4.97 percent on the company's debt. The company is evaluating a new project that has the same risk as the company itself. The project will generate annual after tax cash flows of $303,000 per year for 8 years. The tax rate is 40 percent. What is the most the company would be willing to spend today on the project?

Reference no: EM132471794

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