Jackson Installers wants to purchase $1,257,000 of new equipment in order to lower annual operating costs by $428,000. The equipment will be depreciated straight-line to a zero book value over its 4-year life, and then sold for $46,200. The company must hold an extra $296,200 of inventory during the project. The company has a target debt-equity ratio of 0.52. Their cost of equity is 10.0, and the pretax cost of debt is 6.2. Assume a 21 percent tax rate.

Calculate the project's NPV.

WACC =

NPV =

Now suppose that Jackson Installers needs to raise external financing in order to pay for the upfront costs. The company's flotation cost for equity is 8.00 percent, and 6.85 percent for debt. Calculate the new NPV for the project.

Average flotation cost =

NPV =

If Jackson Installers can finance the equity portion of the initial costs internally, what is the NPV of the project?

Average flotation cost =

NPV =