Explore BrainMass

Explore BrainMass

    Burns and Nuble: What is the net present value of the projec

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Burns and Nuble is considering an investment in a project which would require an initial outlay of $320,000 and produce expected cash flows in years 1-5 of $87,385 per year. You have determined that the current after-tax cost of the firms capital (required rate of return) for each source of financing is as follows:

    cost of long-term debt 8%
    cost of preferred stock 12%
    cost of common stock 16%

    Long term debt currently makes up 20% of the capital structure, preferred stock 10% and common stock 70%. What is the net present value of this project?

    © BrainMass Inc. brainmass.com June 4, 2020, 1:54 am ad1c9bdddf

    Solution Summary

    A detailed calculation of the net present value for the project has been provided. The solution provided is in an excel format with formulas for your reference as well.