River Street Corporation has riskless debt with book value of $8 million and market value...
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River Street Corporation has riskless debt with book value of $8 million and market value of $10 million. It has 1 million shares outstanding. The share price has increased by 25 percent from the price of $16 one year ago. Its equity beta is 1.2. River Street plans to maintain the same capital structure in future. The risk-free beta is 4% and the market-risk premium is 5%. The corporation tax is 20%. A new project with the same risk as the existing operations will require an initial investment of $1,000,000 and produce annual PRE-TAX cash flows of $360,000 for the next four years. Find the NPV of the new project to River Street
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