Question
Question 21 A project costs $17.5 million and is expected to produce cash flows of $4 million a year for 10 years. The opportunity cost
- Question 21
A project costs $17.5 million and is expected to produce cash flows of $4 million a year for 10 years. The opportunity cost of capital is 14 percent. If the firm has to issue stock to undertake the project and issue costs are $500,000 what is the project's APV?
-
- $1.30 million
-
- $3.56 million
-
$0.84 million
-
$2.86 million
-
$1.54 million
-
- Question 22
A firm has a project with an NPV of $78 million. If it has access to risk-free government financing that can create a permanent annual tax shield of $4.5 million, what is the APV of the project assuming the risk-free interest rate is 7 percent?
-
- $13.71 million
-
- $18.84 million
-
- $17.15 million
-
- $9.33 million
-
- $3.67 million
-
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started