Alpha industries is considering a project with an initial cost of $8 million. the project will produce cash inflows of $1.49 million per year for 8 years. the project has the same risk as the firm. the firm has a pretax cost of debt of 5.61 percent and a cost of equity of 11.27 percent. the debt–equity ratio is .60 and the tax rate is 35 percent. what is the net present value of the project?

NPV = 1,003,046

Explanation:

NPV = Present value of income - investment

investment 8,000,000

1,490,000 income per year during 8 years at rate x

We need to calculate the WACC so we can know the rate

equity-ratio = 0.40

debt-equity ratio = 0.6

WACC 6.69590%

Now that we achieve the rate we solve for the present value of the cash flow

PV 9,003,046

And finally get the answer

NPV 9,003,046 - 8,000,000 = 1,003,046

borrow money from the government then pay the government back 5k

answerdemographic;