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stranahan stranahan
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7 years ago
Your firm has an average-risk project under consideration. You choose to fund the project in the same manner as the firm's existing capital structure. If the cost of debt is 9.50%, the cost of preferred stock is 10.00%, the cost of common stock is 12.00%, and the WACC adjusted for taxes is 11.50%, what is the IRR of the project, given the expected cash flows listed here? Use a financial calculator to determine your answer.

Category   T0   T1   T2   T3
Investment   -$800,000         
NWC   -$50,000          $50,000
Operating Cash Flow      $350,000   $350,000   $350,000
Salvage              $20,000
Total Incremental Cash Flow   -$850,000   $350,000   $350,000   $420,000

A) About 11.50%
B) About 14.67%
C) About 28.30%
D) There is not enough information to answer this question.
Textbook 
Financial Management: Core Concepts

Financial Management: Core Concepts


Edition: 2nd
Author:
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BleedingDrBleedingDr
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7 years ago
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stranahan Author
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#2
7 years ago
Thank you for  the help. I had a few questions on a few of them and this really confirmed my answers.
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