单选题 A company is considering a $10000 project that will last 5 years. Annual after tax cash flows are expected to be $3000 Target debt/equity ratio is 0.4 Cost of equity is 12% Cost of debt is 6% Tax rate 34% What is the project's net present value (NPV) ?

A、

A. + $1460.
B、

B. + $1245
C、

C.$0.

【正确答案】 A

【答案解析】
First, calculate the weights for debt and equity
w_d+w_e=1
w_e=1-w_d
w_d/w_e=0.40
w_d=0.40×(1-w_d)
w_d=0.40-0.40w_d
1.40w_d=0.40
w_d=0.286, w_e=0.714
Second, calculate WACC
WACC=(w_e×k_d)×(1-t)+(w_e×k_e)=(0.286×0.06×0.66)+(0.714×0.12)= 0.0113+0.0857=0.0970
Third, calculate the PV of the project cash flows
N=5, PMT=-3000, FV=0, I/Y=9.7, CPT PV=11460
And finally, calculate the project NPV by subtracting out the initial cash flow NPV=11460-$10000= $1460