18. A project is expected to generate the constant-growth after-tax operating cash flows of $6 millions (FCF of year 1). The initial investment is $100 million. This particular project will actually support to debt usage of $10 million. This debt has the maturity of ten years while the issuance cost is 3% of the face value. The borrowing rate for this project is 6% while the corporation tax rate is 30%. The firm's opportunity cost of capital is 10% while the constant growth rate for after-tax operating cash flows is 5%. Also, the taking up of this project will force the firm to issue equity of $50 million with 8% issuance cost. Find the APV. Will the project add value to the company? Question 37 [Total of 6 marks] A corporate bond matures in one year. The bond promises a $50 coupon and principal of $1,000 at maturity. Suppose the bond has a 20 percent probability of default and payment under default is $500. If an investor buys the bond for $900, calculate the investor's expected yield on the bond. 18. A project is expected to generate the constant-growth after-tax operating cash flows of $6 millions (FCF of year 1). The initial investment is $100 million. This particular project will actually support to debt usage of $10 million. This debt has the maturity of ten years while the issuance cost is 3% of the face value. The borrowing rate for this project is 6% while the corporation tax rate is 30%. The firm's opportunity cost of capital is 10% while the constant growth rate for after-tax operating cash flows is 5%. Also, the taking up of this project will force the firm to issue equity of $50 million with 8% issuance cost. Find the APV. Will the project add value to the company? Question 37 [Total of 6 marks] A corporate bond matures in one year. The bond promises a $50 coupon and principal of $1,000 at maturity. Suppose the bond has a 20 percent probability of default and payment under default is $500. If an investor buys the bond for $900, calculate the investor's expected yield on the bond