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Business, 18.10.2021 05:30 avastanleyy

4. Black Pearl Yachts is considering a project that requires a $180,000 cash outlay and is expected to produce cash flows of $50,000 per year
for the next five years. Black Pearl's tax rate is 25%, and the before-tax
cost of debt is 8%. The current share price for Black Pearl's stock is $56,
and the expected dividend next year is $2.80 per share. Black Pearl's
expected growth rate is 5%. Assume that Black Pearl finances the
project with 60% equity and 40% debt, and the flotation cost for equity
is 4.0%. The appropriate discount rate is the weighted average cost of
capital (WACC). Which of the following choices is closest to the dollar
amount of the flotation costs and the NPV for the project, assuming
that flotation costs are accounted for properly?
Dollar amount of flotation costs NPV of project
A. $4,320
$17,548
B. $4,320
$13,228
C. $7,200
$17,548


4. Black Pearl Yachts is considering a project that requires a $180,000

cash outlay and is expect

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Answers: 1

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