Calculate the npv and irr based on weighted average cost

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Reference no: EM131915030

Suppose there is an investment proposal requiring $16,000 outlay now (time zero) and returning a constant cash flow of $7,000 per period before tax savings due to interest payments for the next three years. The proposal is to have a market debt proportion of 50% (i.e., 0.50). The capital market requires per period rate of return on equity of 27% and on debt of 9%. The corporate tax rate is 40%, and interest is deductible for the calculation of income tax.

Calculate the NPV and IRR based on weighted average cost of capital method,

Arditty-Levy method,

equity residual method, and

adjusted net present value method.

Reference no: EM131915030

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