(Value of firm and WACC) Suppose a firm currently has an unleveraged required return of 13% and perpetual unleveraged after-tax income of $100,000 per year.
The firm has come up with an investment opportunity that would alter the firm's asset makeup so that it would increase its perpetual unleveraged after-tax income to $120,000 per year.
Because the new asset mix is riskier, the firm's unleveraged required return would also increase to 15%. Should the firm undertake this investment opportunity?
Possible answers:
new is better by $30,769.23 (this answer is incorrect- already tried to submit it)
new is better by $35,687.50
new is better by $41,056.25
new is better by $47,318.75
old is better by $47,318.75
old is better by $41,056.25
old is better by $35,687.50
old is better by $30,769.23