What is the net present value of the firm

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Reference no: EM132038411

The firm has annual earnings of $1 million, which are assumed to be an annual perpetuity starting in year 1 (now is year 0). The firm is financed by 40% of debt and 60% of equity. The cost of equity capital is 10% and the cost of debt is 5%. Assume that there are no taxes.

a) What is the firm’s weighted average cost of capital?

b) What is the net present value of the firm?

Reference no: EM132038411

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