Joshua industries is considering a new project with cash inflows of $478,000 for the indefinite future. cash costs are 68 percent of the cash inflows. the initial cost of the investment is $685,000. the tax rate is 34 percent and the unlevered cost of equity is 14.2 percent. the firm is financing $200,000 of the project cost with debt. what is the adjusted present value of the project?

a. $102,429.67
b. $98,311.16
c. $32,408.18
d. $93,940.85

D. $93,940.85

Explanation:

Cash inflows (Ci) = $478,000

Cash costs (Cc) = 0.68 of Ci

Initial investment (I) = $685,000

Tax rate (r) = 0.34

Unlevered cost of equity (Ue) = 0.142

Amount financed with cost of debt (D) = $200,000

Earnings after taxes (E) are given by:

Net present value is given by the earnings adjusted by the unlevered cost of equity minus the initial investment:

The adjusted present value (APV) is given by the NPV added to the present value of the cost of debt financing:

e would be the answer

answer; 33,000;