What is the adjusted present value of this project

Assignment Help Financial Management

Reference no: EM132008402

Triad Corporation has established a joint venture with Tobacco Road Construction, Inc., to build a toll road in North Carolina. The initial investment in paving equipment is $80.6 million. The equipment will be fully depreciated using the straight-line method over its economic life of five years. Earnings before interest, taxes, and depreciation collected from the toll road are projected to be $12.7 million per annum for 20 years starting from the end of the first year. The corporate tax rate is 40 percent. The required rate of return for the project under all-equity financing is 13 percent. The pretax cost of debt for the joint partnership is 9.1 percent. To encourage investment in the country’s infrastructure, the U.S. government will subsidize the project with a $25.6 million, 15-year loan at an interest rate of 5.6 percent per year. All principal will be repaid in one balloon payment at the end of Year 15.

What is the adjusted present value of this project? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Reference no: EM132008402

Questions Cloud

Discuss the estimate cost tools and techniques : Discuss the Estimate Cost tools and techniques and how they're used to derive cost estimates. Discuss when during the project life cycle the tools should be use

Average length of the firm short-term operating cycle : Estimate the average length of the firm's short-term operating cycle. How often would the cycle turn over in a year?

Identify the three best practice you believe would be useful : Take a position on whether or not you would want to pursue a career as an IT auditor. Explain the key reasons why or why not.

What changes have happened since each of these incidents : This will be a basic research paper that further explores one of the case studies What changes have happened since each of these incidents or studies?

What is the adjusted present value of this project : What is the adjusted present value of this project?

Prepare the entry to correct the prior years depreciation : Depreciation has been entered for 5 years on this basis. Prepare the entry to correct the prior years' depreciation, if necessary

Default and liquidity risks : You are also considering two corporate bonds, one with a 3-year maturity and one with a 6-year maturity. Both have the same default and liquidity risks.

What rate of return should an investor : Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds?

Graph the call option cash flow schedule : Graph the call option cash flow schedule. Determine the speculator’s profit if the yen appreciates to $1.00/100 yen.

User Account

All Pages