A firm has a project that has a present value of cash flows of $12,000,000 and an initial investment of $11,500,000.

1. What is the NPV of the project?
2. Now, assume the firm has an optimal capital structure of 30 percent debt and 70 percent equity and it faces flotation costs of 3 percent on new debt issues and 12 percent on new equity issues. What is the flotation cost adjusted initial investment?
3. What is the NPV with the flotation cost adjusted initial investment?