A company is considering a new project that requires an investment of $96 million in machinery. This is expected to produce sales of $120M per year for 4 years. Operating expenses are 70% of sales. Operating expenses do not include depreciation. The machinery will be fully depreciated to a zero-book value over 4 years using straight-line depreciation. At the end of the year 4, they can sell the machinery for $10M. working capital costs are negligible. The tax rate is 25%. The unlevered cost of capital is 11%

1. Calculate the base case NPV (without debt)
2. Company plans to use $30M in bons. The remaining funds will come from retained earnings. The bonds have a 4-year life, a coupon rate of 7% and a yield of 7%. Use the adjusted present value (APV) to find value of the project. You do not need to rebalance the debt.