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