Solution-Compute the adjusted present value

Compute the adjusted present value

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Reference no: EM133060758

MVP, Inc., has produced rodeo supplies for over 36 years. The company currently has debt-equity ratio of 54% and the tax rate is 26%. The required return on the firm's levered equity is 13%. The company is planning to expand its production capacity. The equipment to be purchased is expected to generate the following unlevered cash flows:

Year	Cash Flow
0	-$12,948,366
1	$5,015,766
2	$8,995,943
3	$8,615,212

The company has arranged a debt issue of $8,787,277 to partially finance the expansion. Under the loan, the company would pay interest of 8.2% at the end of each year on the outstanding balance at the beginning of the year. The company also would make year-end principal payments of one third of the debt, completely retiring the issue by the end of the third year.

Compute the adjusted present value

NOTE: Enter the number rounding to four DECIMALS. If your decimal answer is 0.034576, your answer must be 0.0346. DO NOT USE the % sign

Reference no: EM133060758

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Compute the adjusted present value

Reference no: EM133060758

Reference no: EM133060758

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