Question: Torpedo Co. is considering a new project generating an annual cash revenue of $500,000 in perpetuity. Annual costs are 70 percent of the cash revenue.

Torpedo Co. is considering a new project generating an annual cash revenue of $500,000 in perpetuity. Annual costs are 70 percent of the cash revenue. 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?

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