q4

You are a consultant who has been hired to evaluate a new product line for Markum Enterprises. The upfront investment required to launch the product line is $13 million. The product will generate free cash flow of $0.78 million the rst year, and this ee cash flow is expected to grow at a rate of 3% per year. Markui has an equity cost o capital o 11 % a debt cost of capital of 6 and a x rate 4 % Na mma tais a debt-equity ratio of 0.40 a. What is the NPV of the new product line (including any tax shields from leverage)? b. How much debt will Markum initially take on as a result of launching this product line? c. How much of the product line's value is attributable to the present value of interest tax shields? a. What is the NPV of the new product line (including any tax shields from leverage)? The NPV of the new product line is s milion. (Round to two decimal places.) b. How much debt will Markum initially take on as a result of launching this product line? Debt will be Smlin (Round to two decimal places.) c. How much of the product line's value is attributable to the present value of interest tax shields? The amount of the product line's value that is attributable to the present value of interest tax shields is illion. (Round to two decimal places.)