Calculate net present value for investment-flow-to-equity

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Reference no: EM131189149

Michael Corporation is examining a potential investment opportunity that will require the company to spend $120 million up front. The company will finance this project with $90 million in equity with a required return of 12% and with $30 million in debt offering a yield of 6%. The project will generate a perpetual cash flow, before interest and taxes, of $18 million annually. Assuming a 30% tax rate, calculate net present value for the investment using FTE (Flow-to-Equity) method.

Reference no: EM131189149

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