Consider a project that will cost $1 Million. The project will generate after-tax cash flows of $400,000 per year for 7 years. Firm will fund the project with 40% equity and 60% debt. Firms cost of equity is 20%, cost of debt is 10%, marginal tax rate is 30%. The floatation cost for equity is 7% and the floatation cost for debt is 5%.

The NPV of the project after adjusting for floatation costs is closest to:

Multiple Choice

• $802,579.6

• $61,571.1

• $741,008.5

• $752,412.4