First and Ten Corporation’s stock returns have a covariance with the market portfolio of .0511. The...

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First and Ten Corporation’s stock returns have a covariance withthe market portfolio of .0511. The standard deviation of thereturns on the market portfolio is 22 percent and the expectedmarket risk premium is 6.4 percent. The company has bondsoutstanding with a total market value of $56.9 million and a yieldto maturity of 6.7 percent. The company also has 6.1 million sharesof common stock outstanding, each selling for $32. The company’sCEO considers the firm’s current debt-equity ratio optimal. Thecorporate tax rate is 24 percent and Treasury bills currently yield4.5 percent. The company is considering the purchase of additionalequipment that would cost $58.5 million. The expected unleveredcash flows from the equipment are $19.25 million per year for 5years. Purchasing the equipment will not change the risk level ofthe firm. Calculate the NPV of the project. (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)

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Covariance of Stock returns with market portfolio 00511 Standard deviation of returns of market portfolio 22 Variance of returns of market portfolio Standard deviation of returns of market portfolio2 222 022 x 022 00484 Beta of stock of First Ten Covariance of Stock returns with market portfolio Variance of returns of market portfolio See Answer

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First and Ten Corporation’s stock returns have a covariance withthe market portfolio of .0511. The standard deviation of thereturns on the market portfolio is 22 percent and the expectedmarket risk premium is 6.4 percent. The company has bondsoutstanding with a total market value of $56.9 million and a yieldto maturity of 6.7 percent. The company also has 6.1 million sharesof common stock outstanding, each selling for $32. The company’sCEO considers the firm’s current debt-equity ratio optimal. Thecorporate tax rate is 24 percent and Treasury bills currently yield4.5 percent. The company is considering the purchase of additionalequipment that would cost $58.5 million. The expected unleveredcash flows from the equipment are $19.25 million per year for 5years. Purchasing the equipment will not change the risk level ofthe firm. Calculate the NPV of the project. (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)