What is the npv of the planned expansion

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Reference no: EM133326455

Case: Sustef corp. is a company that is planning to expand its operations outside of the southeast and into the northwest part of the US starting january 1, 2023. This expansion has the same level of risk as the company's current operations. You are Sustef's CFO and have come up with the following projections for this expansion:

Financial Projections for the expansion:

Initial cost at beginning of 2023: $50 million

Free Cash Flow in 2023: $18 million

Free Cash Flow in 2024: $$20 million

Growth Rate after 2024: 2% forever

Current Sustef Data as of 1/1/23:

Face value of bonds: $30 million

Coupon Rate of Bonds: 7%

Maturity of Bonds: 20 Years

Shares of Outstanding Stock: $2million

Price per share of stock: $120

Bonds are currently trading at 102

Beta of Sustef Stock: 1.1

Risk Free Rate: 3%

Estimate of market Risk Premium: 5.7%

Marginal Tax Rate: 21%

Question: Based on the information above, what is the NPV of the planned expansion? (You must show all work and formulas to receive full credit.)

Reference no: EM133326455

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