Question
Digital Organics (DO) has the opportunity to invest $1.07 million now (t = 0) and expects after-tax returns of $670,000 in t = 1 and
Digital Organics (DO) has the opportunity to invest $1.07 million now (t = 0) and expects after-tax returns of $670,000 in t = 1 and $770,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 14% with all-equity financing, the borrowing rate is 10%, and DO will borrow $370,000 against the project. This debt must be repaid in two equal installments. Assume debt tax shields have a net value of $0.25 per dollar of interest paid. Calculate the projects APV. (Do not round intermediate calculations. Rounddown your answer to the nearest whole dollar.) PLEASE SHOW ALL OF THE STEPS THANK YOU
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