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Category > Accounting Posted 01 May 2017 My Price 5.00

Digital Organics (DO) has the opportunity to invest

 

Digital Organics (DO) has the opportunity to invest $1.03 million now (t= 0) and expects after-tax returns of $630,000 int= 1 and $730,000 int= 2. The project will last for two years only. The appropriate cost of capital is 11% with all-equity financing, the borrowing rate is 7%, and DO will borrow $330,000 against the project. This debt must be repaid in two equal installments. Assume debt tax shields have a net value of $0.20 per dollar of interest paid. Calculate the project’s APV.(Do not round intermediate calculations. Rounddown your answer to the nearest whole dollar.)
 
 

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Alpha Geek
(8)
Status NEW Posted 01 May 2017 04:05 PM My Price 5.00

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file 1493657684-answer1.docx preview (151 words )
D-----------igi-----------tal----------- Or-----------gan-----------ics----------- (D-----------O) -----------has----------- th-----------e o-----------ppo-----------rtu-----------nit-----------y t-----------o i-----------nve-----------st -----------$1.-----------03 -----------mil-----------lio-----------n n-----------ow -----------(t=----------- 0)----------- an-----------d e-----------xpe-----------cts----------- af-----------ter------------ta-----------x r-----------etu-----------rns----------- of----------- $6-----------30,-----------000----------- in-----------t= -----------1 a-----------nd -----------$73-----------0,0-----------00 -----------int-----------= 2-----------. T-----------he -----------pro-----------jec-----------t w-----------ill----------- la-----------st -----------for----------- tw-----------o y-----------ear-----------s o-----------nly-----------. T-----------he -----------app-----------rop-----------ria-----------te -----------cos-----------t o-----------f c-----------api-----------tal----------- is----------- 11-----------% w-----------ith----------- al-----------l-e-----------qui-----------ty -----------fin-----------anc-----------ing-----------, t-----------he -----------bor-----------row-----------ing----------- ra-----------te -----------is -----------7%,----------- an-----------d D-----------O w-----------ill----------- bo-----------rro-----------w $-----------330-----------,00-----------0 a-----------gai-----------nst----------- th-----------e p-----------roj-----------ect-----------. T-----------his----------- de-----------bt -----------mus-----------t b-----------e r-----------epa-----------id -----------in -----------two----------- eq-----------ual----------- in-----------sta-----------llm-----------ent-----------s. -----------Ass-----------ume----------- de-----------bt -----------tax----------- sh-----------iel-----------ds -----------hav-----------e a----------- ne-----------t v-----------alu-----------e o-----------f $-----------0.2-----------0
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