25 Jul WHAT IS THE ADJUSTED PRESENT VALUE OF THIS PROJECT?
Triad Corporation has established a joint venture with Tobacco Road Construction Inc. to build Show more 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 $81.3 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 $13.4 million per annum for 20 years starting from the end of the first year. The corporate tax rate is 35 percent. The required rate of return for the project under all-equity financing is 14 percent. The pretax cost of debt for the joint partnership is 9.8 percent. To encourage investment in the countrys infrastructure the U.S. government will subsidize the project with a $26.3 million 15-year loan at an interest rate of 6.3 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 i.e. 1234567. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g. 32.16)) Adjusted present value $ Show less
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