Carpel Tunnel Gold Mine (CTGM) is evaluating a project with a 2-year life. As consultant, you are given the following information.

Table 1: Data related to CTGMs proposed expansion project.

Tax Rate	40%
Initial Investment	$1,000,000
Salvage Value at any time during the project	$100,000
Initial Investment in Net Working Capital	$50,000
Sales Year 1	$2,000,000
Sales Year 2	$4,000,000
Annual Operating Costs (each year)	$200,000
3-Year MACRS Depreciation Schedule
Year 1	.3333
Year 2	.4444
Year 3	.1482
Year 4	.0741

Table 2: Data related to CTGMs capital structure:

Tax Rate	40%
Cost of Equity	18%
Coupon Rate	8%
Yield to Maturity on Debt	6%
Term to Maturity	20 years
Coupon Payments	Semi-Annual
Face Value of a Bond	$1,000
Quantity of Bonds Outstanding	15,000
Market Value of the Firm	$48,467,215.80

Table 3: Data related to the Pure Play Companys cost of capital:

Tax Rate	40%
YTM	7%
Cost of Equity	23%

1. Assume it is an expansion project. What is the NPV of the expansion project?

b.Now assume CTGMs project is in a new line of business. Use information from the pure play company to re-estimate the WACC and find the NPV of the project