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Dorman Industries has a new project available that requires an initial investment of $4.6 million. The project will provide unlevered cash flows of $685,000 per year for the next 20 years. The company will finance the project with a debt-to-value ratio of .4. The company’s bonds have a YTM of 6.9 percent. The companies with operations comparable to this project have unlevered betas of 1.16, 1.09, 1.31, and 1.26. The risk-free rate is 3.9 percent, and the market risk premium is 7.1 percent. The company has a tax rate of 35 percent. What is the NPV of this project?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92778681

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