ABC Inc. is evaluating the feasibility of opening a new $40 million manufacturing facility in Cleveland. Once completed, the facility will generate an after-tax operating cash flow of $4 million per year forever. ABC Inc. plans to finance the project with 60% retained earnings (equity) and 40% perpetual debt. Even though ABC Inc's market rate of interest is 10%, the Cleveland city council has promised it a loan rate of 6% ABC Inc's current cost of equity is 14%, its tax rate is 35% and the rate on Treasury bills (risk-free rate) is 5%. If the firm's required rate of return under all-equity financing is 12%, please answer the following questions.

a. What would be the project's NPV if the project were all equity-financed? (6points)

b. Please identify and list all the individual financing side effects related to this project. Then evaluate each financing side effect. Should NBM take the project? Why?