When lofonift inc. introduced its flagship product, an mp3 player, it captured the market by offering its product at a very low
1 answer:
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Answer:
Ans. A) NPV= -$9306
Explanation:
Hi, the first thing we need to do is to find the after-tax cost of the firm's capital, and since all capital sources are expressed in terms of after-tax percentage, we just multiply each proportion of capital by its costs, I mean
Long term Debt (7%) * 25% +Preffered Stock(11%)*15% + Common Stock(15%)*60%
The answer to this is 12.40%.
Now, we can find the net present value of this project by using the following formula.
Since the expected cash flow takes place 5 times form year 1 to 5, and is equal to $95,450, "n" is equals to 5 and "CashFlow" is equal to $95,450.
Therefore, the NPV of this project is -$9,306, which is answer A)
Best of luck.