Orchard farms has a pre-tax cost of debt of 7.68 percent and a cost of equity of 15.2 percent. the firm uses the subjective approach to determine project discount rates. currently, the firm is considering a project to which it has assigned an adjustment factor of -0.5 percent. the firm's tax rate is 34 percent and its debt-equity ratio is 0.45. the project has an initial cost of $4.3 million and provides cash inflows of $1.27 million a year for 5 years. what is the net present value of the project

NPV of the project 497,000

Explanation:

First, we calcualte the WACC for the firm

Ke= cost of capital=0.152

Equity weight0.55

Kd= cost of debt=0.0768

Debt Weight0.45

tax rate=0.34

WACC10.64096%

Then, we adjust for the proposed factor: (-0.5 percent)

10.64096% - 0.5% = 10.14096% This will be the project rate.

Now, we calcualte the NPV

The present value of the cash inflows:

C        1.27

time       5

rate       0.1014096

PV$4.7970

NPV  =  4.797 millions  -  4.3 millions  =  0.497 millions  =  $497,000

answer; ///the name of the central bank of the united states is called; ///the federal reserve known as the federal