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Consider a project to produce solar water heaters. It requires a $10 million investment and offers...

Consider a project to produce solar water heaters. It requires a $10 million investment and offers a level after-tax cash flow of $1.75 million per year for 10 years. The opportunity cost of capital is 12%, which reflects the project’s business rick.

Suppose the project is financed with $ 5 million of debt and $5 million of equity. The interest rate is 8% and the marginal tax rate is 35%. An equal amount of the debt will be repaid in each year of the project's life. Calculate APV.

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