A new firm requires an initial investment of $1,000 and will generate a before-tax gross...
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Finance
A new firm requires an initial investment of $1,000 and will generate a before-tax gross return of $2,300 after one year and then shut down. The firm is 36% financed with debt at an expected return of 3%.
The appropriate unlevered after-tax cost of capital is 14% and the marginal income tax rate is 21%.
1. What is the weighted average cost of capital?
2.What is the present value of the cash flows using the weighted average cost of capital?
3.How much debt does the company have (in $)?
4.What is the APV?
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