Triad Corporation has established a joint venture with Tobacco Road Construction, Inc., to build a toll...

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Triad Corporation has established a joint venture with TobaccoRoad Construction, Inc., to build a toll road in North Carolina.The initial investment in paving equipment is $197 million. Theequipment will be fully depreciated using the straight-line methodover its economic life of five years. Earnings before interest,taxes, and depreciation collected from the toll road are projectedto be $29.3 million per annum for 20 years starting from the end ofthe first year. The corporate tax rate is 23 percent. The requiredrate of return for the project under all-equity financing is 15percent. The pretax cost of debt for the joint partnership is 8.7percent. To encourage investment in the country’s infrastructure,the U.S. government will subsidize the project with a $130 million,15-year loan at an interest rate of 5.2 percent per year. Allprincipal will be repaid in one balloon payment at the end of Year15.
What is the adjusted present value of this project? (Do notround intermediate calculations and enter your answer in dollars,not millions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)

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APV NPV PV of depreciation tax shield PV of loan interest tax shield PV of loan repayment Part A NPV Initial investment II 197000000 Annual cash flows ACF 29300000 Discount rate d 15 Life n 20 Tax rate T 23 Aftertax See Answer

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Triad Corporation has established a joint venture with TobaccoRoad Construction, Inc., to build a toll road in North Carolina.The initial investment in paving equipment is $197 million. Theequipment will be fully depreciated using the straight-line methodover its economic life of five years. Earnings before interest,taxes, and depreciation collected from the toll road are projectedto be $29.3 million per annum for 20 years starting from the end ofthe first year. The corporate tax rate is 23 percent. The requiredrate of return for the project under all-equity financing is 15percent. The pretax cost of debt for the joint partnership is 8.7percent. To encourage investment in the country’s infrastructure,the U.S. government will subsidize the project with a $130 million,15-year loan at an interest rate of 5.2 percent per year. Allprincipal will be repaid in one balloon payment at the end of Year15.What is the adjusted present value of this project? (Do notround intermediate calculations and enter your answer in dollars,not millions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)