Solution-Compute the adjusted present value

Compute the adjusted present value

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Reference no: EM133062415

MVP, Inc., has produced rodeo supplies for over 27 years. The company currently has debt-equity ratio of 58% and the tax rate is 34%. The required return on the firm's levered equity is 17%. The company is planning to expand its production capacity. The equipment to be purchased is expected to generate the following unlevered cash flows:

Year	Cash Flow
0	-$15,231,565
1	$5,497,015
2	$8,222,096
3	$8,754,821

The company has arranged a debt issue of $8,990,298 to partially finance the expansion. Under the loan, the company would pay interest of 8.9% at the end of each year on the outstanding balance at the beginning of the year. The company also would make year-end principal payments of one third of the debt, completely retiring the issue by the end of the third year. Compute the adjusted present value

Reference no: EM133062415

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Compute the adjusted present value

Reference no: EM133062415

Reference no: EM133062415

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