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What is the net present value of this project

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Problem - Tom is analyzing a project with an initial cost of $38,000 and free cash flow (FCF) of $29,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance its operations and maintains debt-equity ratio of 0.6. The pre-tax cost of debt is 1 1.0 percent and the cost of equity is 13.0 percent. The tax rate is 34 percent. What is the net present value of this project?

Reference no: EM132966315

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