Cactus cushions a non-traditional pillow manufacturer is


Cactus Cushions, a non-traditional pillow manufacturer, is considering a new capital investment project that requires a $40 million investment today. Next year, the project will generate expected pre-tax cash flows of $2 million, all of which are taxable. The following year, expected cash flows will grow by 2.5%, and constant annual growth will continue forever. Assume that the project will always be backed by debt equal to 60% of the contemporaneous project value. The tax rate is 34%, debt will have required return 6%, and equity will have required return 9%. What is the project NPV according to the WACC method? Show work.

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Financial Management: Cactus cushions a non-traditional pillow manufacturer is
Reference No:- TGS01163076

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