Dyrdek Enterprises has equity with a market value of $10.9
million and the market value of debt is $3.60 million. The company
is evaluating a new project that has more risk than the firm. As a
result, the company will apply a risk adjustment factor of 1.7
percent. The new project will cost $2.22 million today and provide
annual cash flows of $581,000 for the next 6 years. The company’s
cost of equity is 11.11 percent and the pretax cost of debt is 4.89
percent. The tax rate is 35 percent. What is the project’s NPV?
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