How is the present value calculated in this question?

Your company is considering a project that will cost $1 million. The project will generate after-tax cash flows of $250,000 per year for 7 years. The WACC is 15% and the firm's target D/E ratio is .6 The flotation cost for equity is 5% and the flotation cost for debt is 3%. What is the NPV for the project after adjusting for flotation costs? D/E = 0.6 - therefore, DN = 6/16 = 0.375 and EN = 10/16 = 0.625 fa = (.375)(3%) + (.625)(5%) = 4.25% True cost is $1 million /(1-0.0425) = $1,044,386 PV of future cash flows = 1,040,105 NPV = 1,040,105 - 1,044,386 = -4,281 The project would have a positive NPV of 40,105 without considering flotation costs Once we consider the cost of issuing new securities, the NPV becomes negative