Calculate the projects apv

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Digital Organics (DO) has the opportunity to invest $1.02 million now (t = 0) and expects after-tax returns of $620,000 in t = 1 and $720,000 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 $320,000 against the project. This debt must be repaid in two equal installments of $160,000 each. Assume debt tax shields have a net value of $.25 per dollar of interest paid.

Question 1: Calculate the project's APV. (Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations. Round your answer to the nearest whole number.)

Reference no: EM132520327

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