What is maximum amount kewco would be willing to pay

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Reference no: EM13144888

WACC: Common stock of the company KewCo. has a beta of 1.3. Treasury Bills provide a return of 4% and the market risk premium is 16%. Suppose KewCo. total value is composed of 60% equity and 40% debt (by market value). Debt yields of 8%. There are no shares of preferred stock in circulation.

Suppose KewCo is considering a product line that will provide expected new net cash flows of $100,000 per year for 4 years. What is the maximum amount KewCo would be willing to pay for this new product line today?

Reference no: EM13144888

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