Panelli's is analyzing a project with an initial cost of $100,000 and cash inflows of $65,000 in year one and $74,000 in year two. 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 a debt-equity ratio of 0.5. The aftertax cost of debt is 6 percent, the cost of equity is 12 percent, and the tax rate is 35 percent. What is the projected net present value of this project? O 35,000 109,000 O-24,600 9,800. O 20,250

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter23: Other Topics In Working Capital Management
Section: Chapter Questions
Problem 11MC
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Panelli's is analyzing a project with an initial cost of $100,000 and cash inflows of $65,000 in year one and $74,000 in
year two. 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 a debt-equity ratio of 0.5. The aftertax
cost of debt is 6 percent, the cost of equity is 12 percent, and the tax rate is 35 percent. What is the projected net
present value of this project?
O 35,000
109,000
O-24,600
9,800.
O 20,250
Transcribed Image Text:Panelli's is analyzing a project with an initial cost of $100,000 and cash inflows of $65,000 in year one and $74,000 in year two. 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 a debt-equity ratio of 0.5. The aftertax cost of debt is 6 percent, the cost of equity is 12 percent, and the tax rate is 35 percent. What is the projected net present value of this project? O 35,000 109,000 O-24,600 9,800. O 20,250
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