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 45 percent and the taxrate is 23 percent. The required return on the firm’s leveredequity is 12 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 ?$19,400,000
1 5,840,000
2 9,640,000
3 8,940,000

The company has arranged a debt issue of $9.72 million topartially finance the expansion. Under the loan, the company wouldpay interest of 7 percent at the end of each year on theoutstanding balance at the beginning of the year. The company alsowould make year-end principal payments of $3,240,000 per year,completely retiring the issue by the end of the third year.

Calculate the APV of the project. (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)

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MVP, Inc., has produced rodeo supplies for over 20 years. Thecompany currently has a debt-equity ratio of 45 percent and the taxrate is 23 percent. The required return on the firm’s leveredequity is 12 percent. The company is planning to expand itsproduction capacity. The equipment to be purchased is expected togenerate the following unlevered cash flows: YearCash Flow0?$19,400,00015,840,00029,640,00038,940,000 The company has arranged a debt issue of $9.72 million topartially finance the expansion. Under the loan, the company wouldpay interest of 7 percent at the end of each year on theoutstanding balance at the beginning of the year. The company alsowould make year-end principal payments of $3,240,000 per year,completely retiring the issue by the end of the third year. Calculate the APV of the project. (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)