Calculate the value of this project to the equity holders
Financial Management
Johnson Company is investing $2,000 in a project whose after-tax cash flows are: year 1 = $250, year 2 = $500, year 3 = $750, and year 4 = $1,500. Johnson Company’s tax rate is 35% and the risk-free interest rate is 6%. The unlevered cost of equity is Ro = 15%. Johnson will finance the project with $1,200 of debt at a cost of RB = 12%. Johnson’s debt-to-equity ratio is 1.50. When calculating RS, use two decimal places. Round your answer to the nearest dollar. Using the flow to equity approach, calculate the value of this project to the equity holders.
A- $130
B- $193
C- $749
D- $349
