Scc bhd needs 4 million to built a new assembly line. the, Ask an Expert

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SCC Bhd needs $4 million to built a new assembly line. The target debt to equity ratio is 1.0. It is expected to generate after tax cashflow of $500,000 per tear forever. The floatation cost for new equity is 9% with the required rate of return is 12%. The management has decided to fund the project by borrowing money, because the floatation cost is lower and needed fund is relatively small. The tax rate is 35%. Ignoring the floatation cost, what is the net present value of the proposed new assembly line ?

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Accounting Basics, Accounting

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