6. Photochronogragh Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt-equity ratio of 0.60. Its considering building a new $65 million manufacturing facility. This new plant is expected to generate operating cash flows of $9.4 million for 10 years. The company raises all equity from outside financing. There are two financing options:

1). A new issue of common stock: The flotation costs of the new common stock would be 8 percent of the amount raised. The required return on the companys new equity is 14 percent.

2). A new issue of 20-year bonds: The flotation costs of the new bonds would be 4 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 8 percent, they will sell at par.

What is the NPV of the new plant? Should this project be accepted? Ignore salvage value and investment in net working capital. Assume that PC has a 21 percent tax rate.