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Te firm has a target debt-to-equity ratio of 40 percent

TGIF Sportswear is considering expanding its T-shirt line. The project would last 3 years and has an initial investment of $200,000. The after-tax cash flows are estimated at $60,000 for year 1 and $120,000 for each of years 2 and 3. The firm has a target debt-to-equity ratio of 40 percent. Its cost of equity is 14% and its cost of debt is 7%. The tax rate is 34%. Should TGIF Sportswear expand its T-shirt line?

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Finance Basics: Te firm has a target debt-to-equity ratio of 40 percent

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