Suppose that to fund this new project,Aardvark borrows $120 with the principal to be paid in three equal installments at the end each year.The levered value of Aardvark's new project is closest to:
A)$210.15
B)$207.35
C)$207.00
D)$210.50

Question

Quizplus · Accepted Answer

B)r_U = 11ea7cce_3cb0_3735_928c_b345cd01402d_TB1626_11 r_E + 11ea7cce_3cb0_5e46_928c_e18b8a42cc5b_TB1626_11 r_D r_U = 11ea7cce_3cb0_5e47_928c_f1e1c1e03be3_TB1626_11 _.12 + 11ea7cce_3cb0_5e48_928c_75358947921c_TB1626_11 .07 = 10.0% V^U = 11ea7cce_3cb0_8559_928c_05fd2a51b7a7_TB1626_11 + 11ea7cce_3cb0_855a_928c_0bf0f31c084c_TB1626_11 + 11ea7cce_3cb0_855b_928c_b3cffdd77db2_TB1626_11 = $202.10 PV(interest tax shield)= 11ea7cce_3cb0_ac6c_928c_b5810c18922d_TB1626_11 + 11ea7cce_3cb0_ac6d_928c_8d58054c7941_TB1626_11 + 11ea7cce_3cb0_ac6e_928c_e3f323ce11ce_TB1626_11 PV(interest tax shield)= 11ea7cce_3cb0_d37f_928c_6f5092cefdce_TB1626_11 + 11ea7cce_3cb0_d380_928c_7b3a99837df2_TB1626_11 + 11ea7cce_3cb0_d381_928c_33f065934b60_TB1626_11 = $5.2596 V^L = V^U + PV(interest tax shield)= $202.10 + $5.26 = $207.36

Suppose That to Fund This New Project,Aardvark Borrows $120 with the Principal