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Georgia Movie Company has a capital structure with 50.00% debt and 50.00% equity. The cost of...

Georgia Movie Company has a capital structure with 50.00% debt and 50.00% equity. The cost of debt for the firm is 9.00%, while the cost of equity is 12.00%. The tax rate facing the firm is 35.00%. The firm is considering opening a new theater chain in a local college town. The project is expected to cost $12.00 million to initiate in year 0. Georgia Movie expects cash flows in the first year to be $2.62 million, and it also expects cash flows from the movie operation to increase by 4.00% each year going forward. The company wants to examine the project over a 11.00-year period.

What is the WACC for this project?

What is the NPV of this project? (express answer in millions, so 1,000,000 would be 1.00)

Solutions

Expert Solution

Calculation for WACC and NPV is given below

Working is given below

jeff jeffy answered 2 years ago
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