i=rdebt=6%KU=rassets=12%0.34KI=requity=27.84%K=MWACC=8.74%=2%OCFO=$100,000OCF14=$39,800=25,000($5$3)(10.34)+$20,000OCF5=$43,100=$39,800+$5,000(10.34)=Taxrate=34%Debt-to-equityratio=4Risk-freerate The 5-year project requires equipment that costs $100,000. If undertaken, the shareholders will contribute $20,000 cash and borrow $80,000 at 6 percent with an interest-only loan with a maturity of 5 years and annual interest payments. The equipment will be depreciated straight-line to zero over the 5 -year life of the project. There will be a pre-tax salvage value of $5,000. There are no other start-up costs at year 0 . During years 1 through 5 , the firm will sell 25,000 units of product at $5; variable costs are $3; there are no fixed costs. What is the NPV of the project using the APV methodology? APV=i=1T(1+Ku)tOCFt(1)+(1+i)tDt+(1+i)tIt+(1+Ku)TTVTC0 i=rdebt=6%KU=rassets=12%0.34KI=requity=27.84%K=MWACC=8.74%=2%OCFO=$100,000OCF14=$39,800=25,000($5$3)(10.34)+$20,000OCF5=$43,100=$39,800+$5,000(10.34)=Taxrate=34%Debt-to-equityratio=4Risk-freerate The 5-year project requires equipment that costs $100,000. If undertaken, the shareholders will contribute $20,000 cash and borrow $80,000 at 6 percent with an interest-only loan with a maturity of 5 years and annual interest payments. The equipment will be depreciated straight-line to zero over the 5 -year life of the project. There will be a pre-tax salvage value of $5,000. There are no other start-up costs at year 0 . During years 1 through 5 , the firm will sell 25,000 units of product at $5; variable costs are $3; there are no fixed costs. What is the NPV of the project using the APV methodology? APV=i=1T(1+Ku)tOCFt(1)+(1+i)tDt+(1+i)tIt+(1+Ku)TTVTC0