Problem $6$

SEOF Ltd$.$ produces offshore wind. The company currently has a debt$-$equity ratio of $50\%,$ and pays $29\mathrm{.}8\%$ tax. The required return on the company's levered equity is $16\%.$ SEOF is planning to expand its production capacity. The equipment to be purchased is expected to generate the following unlevered cash flows:

$\backslash$table$[[$Year$,0,1,2,3],[$Cash Flow $(),-24000000,8000000,13000000,10000000]]$

The company has arranged a $12$ million debt issue to partly finance the expansion. The company would pay interest of $9\%$ at the end of each year on the outstanding balance at the beginning of the year.

The company will also make year$-$end principal payments of $4$ million per year, completely retiring the issue by the end of the third year.

Under the adjusted present value method, should the company proceed with the expansion?