Assuming that to fund the investment Taggart will take on $250 million in permanent debt and assuming Taggart will incur a 2% (after-tax)underwriting fee on the new debt issue,the NPV of Taggart's new rail line is closest to:
A)$195 million
B)$200 million
C)$235 million
D)$240 million

Question

Quizplus · Accepted Answer

C)NPV = V^L - Investment = V^U + T_cD - Investment - issuance cost = 11ea7cce_3cb2_a856_928c_b3a5753ed089_TB1626_11 + (35%)$250 million - $250 million - (2%)($250)= 232.5

Assuming That to Fund the Investment Taggart Will Take on $250