Books Inc. is a publicly traded publishing company. It has a current stock price of $75 per share and an equity beta of 0.8. Books is consistently profitable and faces a marginal tax rate of 21%. It also maintains a target leverage ratio of 40%. Books debt is AAA-rated and can be considered essentially risk free. The risk free rate in the economy is 5% and the market premium is 4%. You may assume that the CAPM holds.

Part 1: Books is considering a project that will expand its existing publishing business. The expansion would require an initial investment of $50 million dollars. It would produce annual free cash flows of $4 million, which would begin in one year and continue in perpetuity. What is the NPV of the investment project? (Please express your answer in millions of dollars, rounded to the nearest hundredth. For example, $100.569 million should be entered as $100.57.)

Part 2: What is the debt capacity created by the new investment project at the time it is initiated? (Please express your answer in millions of dollars, rounded to the nearest hundredth. For example, $100.569 million should be entered as $100.57.)

Part 3:Suppose that Books also has the opportunity to create an online division that will focus on digital distribution of content. Books believes that ultimately the business risk of this new venture is comparable to the business risk of its existing operations. However, the new division will have fewer tangible assets. So, Books would manage the division at a target leverage ratio of 20% instead of 40%. What is the business risk (i.e., LaTeX: \beta_{OA} O A) of Books existing operations? (Please express your answer rounded to the nearest hundredth. For example 1.569 should be entered as 1.57.)

Part 4: What would be an appropriate opportunity cost of capital (or after-tax WACC) for Books to use to value free cash flows in its new online division? (You may assume that the cost of debt capital is the same for the online division as for the existing operations. Please express your answer as a percentage, rounded to the nearest hundredth. For example 10.569% should be entered as 10.57.)