You are given the following data for a project that is to be evaluated using the APV method. Year 3 $138,500 $10,000 $84,000 $30,000 $140,000 EBIT CAPEX Depreciation Increase in NWC Year-end net debt $80,000 O $201.765 O $185,617 O $193,822 O $222,872 1 Cost of net debt = 8% Unlevered cost of capital - 11.8% Corporate tax rate - 30 % Calculate the total value of the project at t-0, using the APV method. O $213,918 $127,000 $60,000 $72,000 $50,000 $100,000 2 $133,000 $40,000 $80,000 $60,000 $140,000

You are given the following data for a project that is to be evaluated using the APV method. Year 3 $138,500 $10,000 $84,000 $30,000 $140,000 EBIT CAPEX Depreciation Increase in NWC Year-end net debt $80,000 O $201.765 O $185,617 O $193,822 O $222,872 1 Cost of net debt = 8% Unlevered cost of capital - 11.8% Corporate tax rate - 30 % Calculate the total value of the project at t-0, using the APV method. O $213,918 $127,000 $60,000 $72,000 $50,000 $100,000 2 $133,000 $40,000 $80,000 $60,000 $140,000

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.3.2P

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Net present value method, present value index, and analysis for a service company First United Bank Inc. is evaluating three capital investment projects by using the net present value method. Relevant data related to the projects are summarized as follows: Instructions 1. Assuming that the desired rate of return is 15%, prepare a net present value analysis for each project. Use the present value table appearing in Exhibit 2 of this chapter. 2. Determine a present value index for each project. (Round to two decimal places.) 3. Which project offers the largest amount of present value per dollar of investment? Explain.
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