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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 9.00%, the cost of preferred stock is 12.00%, the cost of common stock is 16.00%, and the WACC adjusted for taxes is 14.00%, 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   -$2,000,000         
NWC   -$250,000         $250,000
Operating Cash Flow      $850,000   $850,000   $850,000
Salvage              $50,000
Total Incremental Cash Flow   -$2,250,000   $850,000   $850,000   $1,150,000

A) About 14.00%
B) About 12.13%
C) About 24.95%
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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monkfuzzymonkfuzzy
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7 years ago
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stranahan Author
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#2
7 years ago
Thank you very much for this. It's really helpful.
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