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An all-equity firm is considering the purchase of a depreciable asset that costs $680,000 and would be fully depreciated over six years using the

 

An all-equity firm is considering the purchase of a depreciable asset that costs $680,000 and would be fully depreciated over six years using the straight-line method. The asset is expected to generate $200,000 per year in earnings before taxes and depreciation for six years. The required return on the company's unlevered equity is 12.4 percent and the asset will not change the risk of the company. The risk-free rate is 5 percent and the tax rate is 21 percent. To partially finance the project, the firm can issue $515,000 of six-year, non- amortizing debt at an interest rate of 8.7 percent. The principle will be repaid in its entirety at the end of year six. What is the APV of the project? Enter your answer rounded to the nearest whole number (E.g., 155950). The program will accept answers within 5 of the correct answer.

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