Calculate the npv of the project

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Please round the final answer to 4 decimal places.

DBC Inc. is considering a 7-year project which requires a $45,000 machine. The CCA rate is 20% and it will be sold for $8,200 when the project ends. The machine is the only asset in the asset class. The project is expected to generate before tax cash flows of $19,500 per year for 7 years. The firm's target debt-to-equity ratio is 0.7. If the project is financed by all equity, the cost of capital would be 14%. The corporate tax rate is 25%. DBC can finance half of the machine cost by borrowing from the provincial government at 3%, which is 2% lower than its cost of debt. However, DBC is required pay 1.6% flotation cost and to repay one third of the loan at the end of year 3 and the remaining balance at year 7. Using the adjusted present value method, calculate the NPV of the project.

Reference no: EM133069531

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