Problem:
Ajax currently has 20% debt and 80% equity. Their weighted average cost of capital is 12%, and the cost of debt is 4%. The tax rate is 40%. The firm is considering a new project. The initial investment is $150,000,000, and the project will generate sales of $80M per year for 8 years. The investment can be depreciated straight-line for 8 years to a zero book value. There are no working capital requirements. Operating expenses (not including depreciation or interest) are $42M per year for 8 years. They plan to fund the project using the proportions listed above and the debt's maturity will match the life of the project.
Required:
Question: Find the value of the project using FTE (Flow to Equity).
Note: Show all workings.