First, calculate the weights for debt and equity
wd + we = 1
we = 1 − wd
wd / we = 0.40
wd = 0.40 × (1 − wd)
wd = 0.40 − 0.40wd
1.40wd = 0.40
wd = 0.286, we = 0.714
Second, calculate WACC
WACC = (wd × kd) × (1 − t) + (we × ke) = (0.286 × 0.06 × 0.66) + (0.714 × 0.12) = 0.0113 + 0.0857 = 0.0970
Third, calculate the PV of the project cash flows
N = 5, PMT = -3,000, FV = 0, I/Y = 9.7, CPT → PV = 11,460
And finally, calculate the project NPV by subtracting out the initial cash flow
NPV = $11,460 − $10,000 = $1,460
