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Calculate the npv of the project-kol inc

    Assignment Instructions

    Assignment ID: FG133000574

    KOL Inc. is considering a 5-year project which requires a $417,000 machine. The CCA rate is 30% and it will be sold for $73,000 when the project ends. The machine is the only asset in the asset class. The project is expected to generate before tax cash ?ows of $285,000 per year for 5 years. The ?rm’s target debt-to-equity ratio is 0.8. If the project is ?nanced by all equity, the cost of capital would be 10%. The corporate tax rate is 39%. To ?nance the machine, KOL plans to borrow $285,000 at 4% and to repay one half of the loan at the end of year 2 and the remaining balance at year 5.

    A. Using the adjusted present value method, calculate the NPV of the project.

    B. Using the weighted average cost of capital method, calculate the NPV of the project.

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