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Exxon-Mobil is thinking about a new project. This project will increase their free cash flows...

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Finance

Exxon-Mobil is thinking about a new project. This project will increase their free cash flows by $100 per year for the next 10 years. The assets of the project have a discount rate of 15%. The project costs $300 and Exxon will issue $300 of debt to finance this project. Exxon will keep debt at $300 for the 10 years of the project. Exxon can raise debt with a coupon rate of 8% at a yield-to-maturity of 5%. Finally, Exxon expects its tax rate to be 0% in the first year of the project because of losses the firm takes in other parts of its business; after the first year, though, the expected tax rate is 30%. Find the NPV of the project if Exxon takes debt with a maturity of 10 years to finance the project. Please show all your steps and formulas clearly.

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