A Project Has an Unlevered NPV of $1

question 39

Multiple Choice

A project has an unlevered NPV of $1.5 million.To finance the project,debt is being issued with associated flotation costs of $60,000.The flotation costs can be amortized over the project's 5-year life.The debt of $10 million is being issued at the market interest rate of 10 percent paid annually,with principal repaid in a lump sum at the end of the fifth year.If the firm's tax rate is 21 percent,calculate the project's APV.

• A)$2,441,107
• B)$1,494,028
• C)$2,384,312
• D)$2,245,618
• E)$1,909,417

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Definitions:

Single Vehicle

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GPA Over 3.0

A grade point average higher than 3.0 on a scale usually ranging from 0 to 4.0, indicating above-average academic performance.

Lower Class

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Upper Class

A social group that is considered to have the highest status in society, typically associated with wealth, power, and privilege.