What is the apv of the project

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(See example on slides 10-14 of Lecture Notes 8) APV Co. has a project that will gross $1 million per year, with costs of $700,000 per year and an initial investment of $1.02 million. The discount rate is 20% (allequity), and the corporate tax rate for the project is 34%. APV, Co. has decided to fine the project partially by a $200,000 debt, which carries an interest rate of 10%

(a) What is the value of the project if APV uses all-equity finance? What is the value of the project if APV according to the current structure of finance?

(b) What is the APV of the project?

(c) What is the NPV using FTE approach?

(d) What is the NPV using the WACC approach?

Reference no: EM133061884

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