Bubbas bowling inc needs to purchase equipment for its 2000, Ask an Expert

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Bubba's Bowling Inc. needs to purchase equipment for its 2.000 bowling alleys The total cost of the equipment is $2 million. It is estimated that the before-tax cash inflows from the project will be $328, 125 annually in perpetuity. Bubba's has a market value ratio of .6667. The firm's cost equity is 13%, its pre-tax cost of debt is 8%, the flotation costs of debt and equity are 2% and respectively. The tax rate is 36%. Assume the project is of similar risk to the firm's existing operations.

What is the WACC?

What is the NPV of the project?

Should Bubba's accept or reject the project?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92252986

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