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A company has established a joint venture with another company to build a toll road. The initial investment is paving equipment is 3 4 million.

A company has established a joint venture with another company to build a toll road.
The initial investment is paving equipment is 34 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 4 million per annum for 27 years starting from the end of the first
year. The corporate tax rate is 20%. The required rate of return for the project under
all-equity financing is 15%. The pretax cost of debt for the joint partnership is 6%. To
encourage investment in the country's infrastructure, the government will subsidize
the project with an 13 million, 15-year loan at an interest rate of 5% per year. All
principal will be repaid in one balloon payment at the end of year 15. The NPV of the
project (rounded to a whole number) is:
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