Project Financing with Negative Cash Flows (This Problem Is Taken Directly from Eschenbach, 2003, pp. 347– 348) Plant construction in an environmentally sensitive area necessitates that a company must...

Project Financing with Negative Cash Flows (This Problem

Is Taken Directly from Eschenbach, 2003, pp. 347–

348) Plant construction in an environmentally sensitive

area necessitates that a company must undertake a wetland

restoration project. The wetland reclamation project would

cost $6M, 80% of which would be financed by a 10-year loan

at 9% (with uniform annual payments). Using a 10-year

horizon and an after-tax rate (MARR) of i = 8%, what is the

present value and equivalent annual cost of this project? The

effective tax rate is 40%.