Question 16 Phonograph Corp manufactures time series photograp D/E ratio of 1. It's considering building a new $40 million facility. This new plant is expected to hic equipment. It is currently at its target generate after-tax cash flows of $5.5 million in perpetuity. There afe two financing options Option 1: A new issue of common stock in market with beta of 1, expected market return of 18%, and risk-free rate of 2% Option 2: A new issue of 8% 20 year bonds that will sell at par The company assigns the project a cost of WACC. Assume there is no change in the firm's capital structure after financing the project. Assuming a tax rate of 35%, what is the new plant (this problem with some tweaks for including FCF represents a comprehensive problem in this course; It includes bond valuation, CAPM, WACC, and capital budgeting)? NPV of the