Business
Business, 22.05.2020 02:00, nayiiii1874

Brian Klaas Consulting, Inc. has capital structure based on 50 percent debt, 15 percent preferred stock, 35 percent common stock. The pre-tax cost of debt 9.4 percent, the cost of preferred is 10.2 percent , and the cost of common stock 17.2 percent. The tax rate is 20 percent. Brian is considering adding a payroll division that is equally risky as the oveeerall company. The cost of forming the new division is $327,000. The expected anual cash flows from the new division are $102,000, $221,000, and $265,000. What is the expected net present value of the investment in the new division.
a. $43,222.
b. $56,878.
c. $78,351.
d. $135,158.
e. $188,152.

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