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Question: You are considering undertaking a project where a $12 million investment would generate after- tax cash flows of $3 million per year for 5 years. Assume the all-equity financing rate for this project is 10%, and that you face a 35% marginal tax rate.

a - What is the NPV and is this a good project?

b - Now assume that you will finance the project by borrowing $10 million at a 7% rate, and that the note is repaid at $2 million per year (plus interest on the outstanding principal)for the five year project life. What is the APV?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92798747

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