MVP, Inc., has produced rodeo supplies for over 20 years. The company currently has a debt-equity...

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MVP, Inc., has produced rodeo supplies for over 20 years. Thecompany currently has a debt-equity ratio of 70 percent and the taxrate is 22 percent. The required return on the firm’s leveredequity is 15 percent. The company is planning to expand itsproduction capacity. The equipment to be purchased is expected togenerate the following unlevered cash flows: Year Cash Flow 0?$19,100,000 1 5,830,000 2 9,630,000 3 8,930,000 The company hasarranged a debt issue of $9.69 million to partially finance theexpansion. Under the loan, the company would pay interest of 6percent at the end of each year on the outstanding balance at thebeginning of the year. The company also would make year-endprincipal payments of $3,230,000 per year, completely retiring theissue by the end of the third year. Calculate the APV of theproject.

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MVP, Inc., has produced rodeo supplies for over 20 years. Thecompany currently has a debt-equity ratio of 70 percent and the taxrate is 22 percent. The required return on the firm’s leveredequity is 15 percent. The company is planning to expand itsproduction capacity. The equipment to be purchased is expected togenerate the following unlevered cash flows: Year Cash Flow 0?$19,100,000 1 5,830,000 2 9,630,000 3 8,930,000 The company hasarranged a debt issue of $9.69 million to partially finance theexpansion. Under the loan, the company would pay interest of 6percent at the end of each year on the outstanding balance at thebeginning of the year. The company also would make year-endprincipal payments of $3,230,000 per year, completely retiring theissue by the end of the third year. Calculate the APV of theproject.