14antseBookPrintReferencesTriad Corporation has established a joint venture with Tobacco Road Construction, Inc.,to build a toll road in North Carolina. The initial investment in paving equipment is $145million. The equipment will be fully depreciated using the straight-line method over itseconomic life of five years. Earnings before interest, taxes, and depreciation collectedfrom the toll road are projected to be $21.7 million per annum for 20 years starting fromthe end of the first year. The corporate tax rate is 25 percent. The required rate of returnfor the project under all-equity financing is 14 percent. The pretax cost of debt for thejoint partnership is 8.3 percent. To encourage investment in the country's Infrastructure,the U.S. government will subsidize the project with a $65 million, 15-year loan at aninterest rate of 4.8 percent per year. All principal will be repaid in one balloon payment atthe end of Year 15.What is the adjusted present value of this project? (Do not round intermediatecalculations and enter your answer in dollars, not millions of dollars, rounded to 2decimal places, e.g., 1,234,567.89)Adjusted present value

Step 1: Determine the Earnings after tax . Earnings after tax is Earnings before Interest Taxes and…

Answered: 14 ants eBook Print References Triad…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 15P

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