14-11. The nation's largest chicken-wing producer, Consolidated Eggleston Inc, (CEI), plans to expand its capacity by building more chicken coops. The expansion project will require an initial out lay of $10 million and will generate an unlevered cashflow of Si million in perpetuity. CEI uses twice as much equity as debt to finance its operations. Its pre-tax cost of debt is 6%, and its cost of equity is 10%. The marginal corporate tax rate is 30%. Calculate the value of this investment opportunity using the APV method.
This question was answered on: May 23, 2022
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