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A project costs $1 million and has a base-case NPV

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Question;A project costs $1 million and has a base-case NPV of exactly zero (NPV = 0). What is the project?s APV in the following cases?a. If the firm invests, it has to raise $500,000 by a stock issue. Issue costs are 15% of net proceeds.b. If the firm invests, its debt capacity increases by $500,000. The present value of interest tax shields on this debt is $76,000.Formula (in words) Calculationa. APV stock issue b. APV debt increases

 

Paper#49426 | Written in 18-Jul-2015

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