A project costing $50 million is expected to generate unlevered after tax cash flows of $10 million

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A project costing $50 million is expected to generate unlevered after tax cash flows of $10 million a year for the next 10 years. The risk free rate is 3%, the firm’s asset beta is 1.5, required return on market is 12%, cost of debt is 8%, annual interest costs related to project are $2 million, and the tax rate is 40%. If you value this project with the APV method, what would be the PV of the tax shield associated with the loan?

Posted Date: Dec 07, 2021 08:50 PM

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A project costing $50 million is expected to generate unlevered after tax cash flows of $10 million

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PV of interest tax shield 537 million or 536806512 ... View the full answer

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