Gemini inc an all-equity firm is considering a 19 million

Reference no: EM13381811

Gemini, Inc., an all-equity firm, is considering a $1.9 million investment that will be depreciated according to the straight-line method over its four-year life. The project is expected to generate earnings before taxes and depreciation of $685,000 per year for four years. The investment will not change the risk level of the firm. The company can obtain a four-year, 9.5 percent loan to finance the project from a local bank. All principal will be repaid in one balloon payment at the end of the fourth year. The bank will charge the firm $28,000 in flotation fees, which will be amortized over the four-year life of the loan. If the company financed the project entirely with equity, the firm's cost of capital would be 13 percent. The corporate tax rate is 30 percent. Using the adjusted present value method, determine whether the company should undertake the project.

Reference no: EM13381811

Questions Cloud

1you have invested 500 shares in maxwells company limited : 1. you have invested 500 shares in maxwells company limited. for the next three years you will receive dividends of

Firm u is an all equity firm and has a market value of : firm u is an all equity firm and has a market value of 500000 and ebit of 100000. firm l is identical in all respects

Xyz has no debt financing and has a value of 45 million and : xyz has no debt financing and has a value of 45 million and ebit of 14.5 million. the firm is planning to change its

International trade agreements eliminate trade barriers : international trade agreements eliminate trade barriers between countries promote investments infuse competitiveness

Gemini inc an all-equity firm is considering a 19 million : gemini inc. an all-equity firm is considering a 1.9 million investment that will be depreciated according to the

International trade agreements eliminate trade barriers : international trade agreements eliminate trade barriers between countries promote investments infuse competitiveness

Modigliani-miller world there are i no taxes ii no : modigliani-miller world there are i no taxes ii no bankruptcy costs iii no conflicts of interest between bondholders

A companys 6 coupon rate semiannual payment 1000 par value : a companys 6 coupon rate semiannual payment 1000 par value bond that matures in 25 years sells at a price of 656.95 the

Use the black scholes model to find the price for a call : use the black scholes model to find the price for a call option with the following inputs current stock price 28 strike

User Account

All Pages