3M is considering creating a product line of ventilators to meet the demand of medical...
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3M is considering creating a product line of ventilators to meet the demand of medical emergency round the world. The estimated cash flows generated by the ventilator product line would be -2,000 in year 0, 800 in year 1, 900 in year 2, 1,000 in year 3, -500 in year 4, and 800 in year 5. All numbers are in thousand U.S. dollars. 3M now has a debt to equity ratio that equals 2:1. Its target debt to equity ratio is 1:3. Suppose 3M does not have preferred stocks. Its corporate tax rate is 35%. Assume the cost of debt is 8% and the cost of equity is 9.68% for 3M. Calculate WACC and MIRR. According to the MIRR method, do you think 3M should invest in the ventilator product line?
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