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Based on market values, Gubler's Gym has an equity multiplier of 1.58 times (i.e. equity...

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Accounting

Based on market values, Gubler's Gym has an equity multiplier of 1.58 times (i.e. equity multiplier is equal to (Equity+Debt)/Equity). Shareholders require a return of 11.39 percent on the company's stock and a pretax return of 4.96 percent on the company's debt. The company is evaluating a new project that has the same risk as the company itself. The project will generate annual aftertax cash flows of $301,000 per year for 7 years. The tax rate is 39 percent. What is the most the company would be willing to spend today on the project?

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