Question

# Top-Down, Inc. finances its operations using $1.50 of debt for every $2 of common stock. The pre-tax cost of debt

is 7.5 percent, the cost of equity is 11 percent, and the tax rate is 34 percent. Currently, the firm is considering a small project that it considers to be equally as risky as the overall firm. The project has an initial cash outlay of $18,500 and is expected to have a single cash inflow of $25,000 at the end of year two. What is the net present value of this project?

Finance

TopDown Inc finances its operations using $1 50 of debt for every $2 of common stock The pretax cost of debt