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The MacCauley Company has sales of $200 million and totaloperating expenses (excluding depreciation) of $130 million.Straight-line depreciation on the company's assets is $15 millionover 4 years. The Upfront Cost equals to the total depreciablevalue on the company’s assets. Assume that all taxable income istaxed at 30 percent. Assume also that net operating working is 3%of sales in each year. Calculate the MacCauley Company's WACC using4% cost of debt, 12% cost of equity. There is 45% equity and 55%debt are on the company’s balance sheet. What is NPV? Would youinvest in the project? Is IRR greater or smaller than WACC? What isthe payback period? (There is no salvage value at the end of 4years)
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