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KIMEP Company has the following incremental cash flows for its new project:

1.  KIMEP Company has the following incremental cash flows for its new project:

Year 0

Year 1

Year 2

Year 3

Category

T0

T1

T2

T3

Investment

-$4,000,000

NWC Change

-$300,000

$300,000

OCFs

$1,500,000

$1,500,000

$1,500,000

Salvage

$250,000



1)     Should KIMEP Co. accept or reject this project at an adjusted WACC of 6% or 8% or 10%?











     2) At what adjusted WACCs will the company accept this project? Hint: Find the IRR of the project and use it as the maximum adjusted WACC for accepting the project.
















3)  What is terminal Value if Growth rate of cash flow was 5%?








4)  What is firm value if KIMEP has some assumption as follow?

        Total Number of shares: 1,000,000

        Total capital structure: 4,000,000

        Debt/ Equity: 0.7

        Cost of equity: 10%    WACC: from answer 1) and 2)

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