Kantra ltd is considering the launch of a new product if, Ask an Expert

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Kantra Ltd. is considering the launch of a new product. If the project is all-equity funded, it will have a NPV of -$15 million, and the required return on equity will be 12 per cent. If Kantra decides to undertake debt, it will pay an interest rate of 6 per cent. The initial investment for the project is $170 million. The corporate tax rate is 30 per cent. There are no personal taxes. Assume that, in the case of debt issuance, the company plans to keep the debt level constant. What is the amount of the debt the company needs to issue so that the project has a zero NPV? (Im thinking: NPV=0 when IRR=cost of capital, but how do you calculate this with the information provided?)

This is all the information provided. No additional information about years.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92721778

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