What is the npv of project using wacc methodology

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The 5-year project requires equipment that costs $100,000. If undertaken, the shareholders will contribute $20,000 cash and borrow $80,000 at 6% with an interest-only loan with a maturity of 5 years and annual interest payments. The equipment will be depreciated straight-line to zero over the 5-year life of the project. There will be a pre-tax salvage value of $5,000. There are no other start-up costs at year 0. During years 1 through 5, the firm will sell 25,000 units of product at $5; variable costs are $3; there are no fixed costs.

Given Information

r (debt) = 6%, r(asset)= 12%, r(equity)= 27.84%, Tax rate = 34%, Risk free rate = 2%, Debt to equity=4

What is the NPV of the project using the WACC methodology? Please give me the detailed answer.

Reference no: EM131939757

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