A firm has a capital structure of 40 debt and 60 equity, Finance Basics

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A firm has a capital structure of 40 debt and 60 equity

Question: A firm has a capital structure of 40% debt and 60% equity. Debt can be issued at a return of 10%, while the cost of equity for the firm is 15%. The firm is considering a $50 million expansion of their production facility. The project has the same risk as the firm overall and will earn $12 million per year for 6 years. What is the NPV of the expansion if the tax rate facing the firm is 40%?

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Finance Basics: A firm has a capital structure of 40 debt and 60 equity

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