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4- Consider a project of the Pearson Company. The timing and size of the incremental after-tax cash flows for an all-equ
Posted: Sat Feb 26, 2022 9:03 am
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- 4 Consider A Project Of The Pearson Company The Timing And Size Of The Incremental After Tax Cash Flows For An All Equ 1 (21.87 KiB) Viewed 45 times
4- Consider a project of the Pearson
Company. The timing and size of the incremental after-tax cash flows for an all-equity firm are $-1000, $140, $280, $390, $500 from year 0 to 4 respectively. The unlevered cost of equity is 40%. a. Calculate the NPV? Should this project be accepted? b. The firm finances the project with $7500 debt at 8% with $100 after-tax flotation costs. Principal is repaid at $600 per year with added interest. Pearson's tax rate is 65%. The net present value of the project under leverage? Now, Should this project be accepted?