net present value of the investment if the investment is 100% equity financed? b) What is the project's adjusted present value? c) What is the project's adjusted present value, if the company is exempt from tax?
Pellix ASA has an investment beta of 1.3. Risk-free interest rate is 4%, and expected return on the market portfolio is 11%. Corporation tax is 27%, creditors and owners do not pay tax. The company is considering investing in a project that is expected to generate an annual cash flow from operations of NOK 4 million after tax for 3 years. The project is assumed to have the same risk as the company. The investment costs NOK 8 million and is 40% loan-financed. The debt cost is 5%, and the loan is repaid in full at the end of the third year.
a) What is the
b) What is the project's adjusted present value?
c) What is the project's adjusted present value, if the company is exempt from tax?
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