PhotoTech Corporation manufactures time series photographic equipment. It is currently at

its target debt$-$equity ratio of $\mathrm{.}70.$ It$$s considering building a new $$45$ million manufacturing

facility. This new plant is expected to generate after$-$tax cash flows of $$6\mathrm{.}2$ million in

perpetuity. The company raises all equity from outside financing. There are three financing

options:

$1.$ A new issue of common stock: The flotation costs of the new common stock would be $8$

percent of the amount raised. The required return on the company$$s new equity is $14$ percent.

$2.$ A new issue of $20-$year bonds: The flotation costs of the new bonds would be $4$ percent of

the proceeds. If the company issues these new bonds at an annual coupon rate of $8$ percent,

they will sell at par.

$3.$ Increased use of accounts payable financing: Because this financing is part of the

company$$s ongoing daily business, it has no flotation costs, and the company assigns it a cost

that is the same as the overall firm WACC. Management has a target ratio of accounts

payable to long$-$term debt of $\mathrm{.}20.($Assume there is no difference between the pre$-$tax and

after$-$tax accounts payable cost.$)$

What is the NPV of the new plant? Assume that PhotoTech has a $35$ percent tax rate.