Projected npv according to wacc method


Cactus cushions, a non traditional pillow manufacturer, is considering a new capital investment project that requires a $40 million investment today. Next year, the project will generate expected pre tax cash flows of $2 million, all of which are taxable. The following year, expected cash flows will grow by 2.5%, and constant annual growth will continue forever. Assume that the project will always be backed by debt equal to 60% of the contemporaneous project value. the tax rate is 34%, debt will have required return 6% and equity will have required return 9%. what is the projected NPV according to the WACC method?

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Finance Basics: Projected npv according to wacc method
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