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Memphic Memphic
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Posts: 728
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6 years ago
The NPV of this project using the WACC method is closest to:
A) $10 million
B) $13 million
C) $42 million
D) $71 million
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
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wrote...
6 years ago
B
Explanation:  B) Since this project is totally debt financed at the risk free rate, the risk free rate of 5% is the before tax WACC. The after tax wacc is the simply rf(1 - Tc) = 5%(1 - 40%) = 3%.
NPV = PV Inflows - Investment =   - $150 = 13.11 million
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