Zulu car rental corporation is trying to determine whether to add 25 cars to its fleet....

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Zulu car rental corporation is trying to determine whether toadd 25 cars to its fleet. The company fully depreciates all itsrental cars over 5 years using the straight line method. The newcars are expected to generate $140,000 per year in earnings beforetaxes and depreciation for 5 years. The company is entirelyfinanced by equity and has a 35% tax rate. The required return onthe company’s unlevered equity is 13% and the new fleet will notchange the risk of the company. What is the maximum price that thecompany should be willing to pay for the new fleet of cars if itremains an all-equity firm? Suppose the company can purchase thefleet of cars for $395,000. Additionally, assume the company canissue $260,000 for 5 year, 8% debt to finance the project. Allprincipal will be repaid in one balloon payment at the end of the5th year. What is the adjusted present value (APV) of theproject?

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Zulu car rental corporation is trying to determine whether toadd 25 cars to its fleet. The company fully depreciates all itsrental cars over 5 years using the straight line method. The newcars are expected to generate $140,000 per year in earnings beforetaxes and depreciation for 5 years. The company is entirelyfinanced by equity and has a 35% tax rate. The required return onthe company’s unlevered equity is 13% and the new fleet will notchange the risk of the company. What is the maximum price that thecompany should be willing to pay for the new fleet of cars if itremains an all-equity firm? Suppose the company can purchase thefleet of cars for $395,000. Additionally, assume the company canissue $260,000 for 5 year, 8% debt to finance the project. Allprincipal will be repaid in one balloon payment at the end of the5th year. What is the adjusted present value (APV) of theproject?