Posted by **Mary** on Sunday, July 10, 2011 at 11:21am.

A firm has debt with a market value of $40 million and an equity value of $160 million. The rate the firm pays on its det is 8% and on its equity is 13%. The corporate tax rate in 35%. There firm s considering a project with the following cash flows:

Year 0 -$10,000

Year 1 $35,000

Year 2 $42,000

Year 3 $57,000

Year 4 -$19,000

Year 5 $27,000

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