Question

The Rare Find Co. has the following information: Debt outstanding: $1,500 million The before-tax cost of debt: 6.5% Market cap: $4,400 million Cost of common stock: 12% Tax rate: 21% Rare Find is evaluating a project with the following information: Over the next five years, EBIT will equal 153 million each year An investment of $100 million is required in net working capital at the beginning of the project, which will be recovered at the end. The equipment cost will be $175 million, depreciated using the straight-line method to zero over the project's life, with no salvage value. The project requires an additional 2% risk premium above the firm's WACC. Calculate the OCF each year, and the NPV of the project.

          The Rare Find Co. has the following information:
Debt outstanding: $1,500 million
The before-tax cost of debt: 6.5%
Market cap: $4,400 million
Cost of common stock: 12%
Tax rate: 21%
Rare Find is evaluating a project with the following information:
Over the next five years, EBIT will equal 153 million each year
An investment of $100 million is required in net working capital at the beginning of the project, which will be recovered at the end. 
The equipment cost will be $175 million, depreciated using the straight-line method to zero over the project's life, with no salvage value.
The project requires an additional 2% risk premium above the firm's WACC.
Calculate the OCF each year, and the NPV of the project.

Added by Laura M.

Question

Please give Ace some feedback