Orchard Farms Has a Pretax Cost of Debt of 7

Multiple Choice

Orchard Farms has a pretax cost of debt of 7.29 percent and a cost of equity of 16.3 percent.The firm uses the subjective approach to determine project discount rates.Currently, the firm is considering a project to which it has assigned an adjustment factor of 1.25 percent.The firm's tax rate is 35 percent and its debt-equity ratio is .48.The project has an initial cost of $3.9 million and produces cash inflows of $1.26 million a year for 5 years.What is the net present value of the project?

A) $421,619
B) $446,556
C) $514,370
D) $561,027
E) $478,721