FIN300 Managerial Finance Professor H. Wang Problem Set #7 Due: Friday, 4/26, 2013 Please make sure to write clearly the name of each member in the...

Lavan Industries, Inc., is considering a new project with a$25 million initialoutlay. The project will generate after-tax (year-end) cash flows of $7 million forfive years. The firm has a debt-to-equity ratio of 0.75. The cost of equity is 15percent and the before-tax cost of debt is 9 percent. The corporate tax rate is 35percent. The project has the same risk as the overall firm. Should Lavan acceptthe project?