Will you recommend the purchase of the equipment

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ABC Company has $10,000,000 par value bonds outstanding with 15 years left to maturity and a coupon rate of 6% (paid annually) while similar bonds are yielding 5.35%. ABC has 1,000,000 shares of common stock outstanding with a book value of $10 per share and a market value of $11.50. The Beta of ABC is 1.35 and the market risk premium is 6% while the expected return on the market is 9%. ABC has a tax rate of 40%. What is the NPV of the project? Will you recommend the purchase of the equipment? Explain your recommendation.

Reference no: EM131540017

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