2. The market-value balance sheet and other financial data for Company XXX are listed below.

Asset value $1,200,000 Debt $300,000

Equity $900,000

$1,200,000 $1,200,000

Cost of debt 6%

Cost of equity 12%

Marginal tax rate 21%

The financial manager of company XXX is considering a project that requires $50,000 investment today and expects to generate a perpetual earnings and cash flow of $5,000 each year (pre-tax). Assume no depreciation. However, the project supports only 40% debt, which is different from the debt ratio of company XXX overall. Calculate NPV of the project by adjusting WACC of the project. (keep four decimals including percentage to avoid rounding error).