-ay - A. c| 1 Normal 1 No Spac.. Heading 7 Subtitle Subtle Em.. Emphasis Font Title P Find - Rc Replace Select- Paragraph Styles Editing Explain the financing effects as they apply to the process of assessing the Adjusted Present Value (APV) of a project. (4 Marks) (b) The CFO of Northern Petroleum Plc is preparing a presentation to her fellow directors to consider investment into a new project in Detriot that would cost $162.5m. To finance the project $42.7 million is available as a soft 3-year development loan offered at a rate of interest discounted by 3.62% from the rate Northern Petroleum would normally pay $59.1 million would be funded by internally generated funds. The balance of funding would be borrowed via a 3-year term loan at a rate of 7 58% Northern Petroleum has a pre-tax cost of capital of 9%. It also pays corporation tax at 18% and can claim writing down allowances at 30% in the first year and 20% thereafter on a reducing balance basis It would generate pre-tax cash inflows of $64 15 million per year over the investment's 3-year life resulting in a $39 2 million residual value at the end of year 3 Required: Calculate the Adjusted Present Value of the above investment and advise the Northem Petroleum CFO as to whether the investment should be accepted 15 Marks) -ay - A. c| 1 Normal 1 No Spac.. Heading 7 Subtitle Subtle Em.. Emphasis Font Title P Find - Rc Replace Select- Paragraph Styles Editing Explain the financing effects as they apply to the process of assessing the Adjusted Present Value (APV) of a project. (4 Marks) (b) The CFO of Northern Petroleum Plc is preparing a presentation to her fellow directors to consider investment into a new project in Detriot that would cost $162.5m. To finance the project $42.7 million is available as a soft 3-year development loan offered at a rate of interest discounted by 3.62% from the rate Northern Petroleum would normally pay $59.1 million would be funded by internally generated funds. The balance of funding would be borrowed via a 3-year term loan at a rate of 7 58% Northern Petroleum has a pre-tax cost of capital of 9%. It also pays corporation tax at 18% and can claim writing down allowances at 30% in the first year and 20% thereafter on a reducing balance basis It would generate pre-tax cash inflows of $64 15 million per year over the investment's 3-year life resulting in a $39 2 million residual value at the end of year 3 Required: Calculate the Adjusted Present Value of the above investment and advise the Northem Petroleum CFO as to whether the investment should be accepted 15 Marks)