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What is the npv of project to an all equity firm

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Reference no: EM132420144

Consider a project of Samsung as:

  • Cash flows: 200,000 per year for the indefinite future
  • Cash costs: 75% of inflows every year
  • initial investment: 200,000 of which 67898.36 will be debt financing with the rest financed by equity
  • corporate tax rate: 35%
  • rA = 18% (unlevered cost of capital)
  • rD = 12% (cost of debt financing).
  • Assume there are no costs of financial destress (direct or indirect)
Required:

Q1: What is the NPV of this project to an all equity firm

Q2: Calculate the APV of this project

Q3: Calculate the WACC of this project

Q4: Confirm that the NPV of the project using the WACC method is the same as that in (Q2) above

Reference no: EM132420144

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